bonus takes over tax threshold

SHEILA54

Hi
My daughter works part time and has an annual salary of £5200. She has discovered that her employers have been paying her on the scale below that which she undertakes and so they have agreed to backdate the amount for 26 months. The problem is that the payment that they have given her, £900, takes her above the tax threshold for the month and she has been taxed on it. She was unaware that this would happen and had booked a holiday with the money. Obviously the amount still keeps her annual income well below the personal tax threshold and she would not have paid tax if they had paid her correctly at the time.

What should she do about this please?
Thanks

Lokolo

If she is paid by PAYE then then tax will be refunded throughout the year. If at the end of the year (tax year, April) she has still overpaid she can claim it back from HMRC.

This is not the case for NI, only income tax.

molerat

What tax code is being used, if 1060L then no tax is due on 2/12 of £5200 + £900 in M2.

zygurat789

The tax code is the all important information. Could you let us know, bearing in mind that the code may well consist of more than five characters.

mgdavid

was she paid a bonus as well, or did you mean back-pay?

SHEILA54

Thank you for your answers. She is looking for her pay slip to get the code and will get back to me. The amount is backpay, not bonus.

SHEILA54

Still waiting for tax code

SHEILA54

Tax code is 1066L. Backpay will be around £1000 gross.

Thanks for your patience

Lokolo

£1000 would take you over the tax free accumulation for 2/12 based on the figures.

If she continue with the salary of £5200 I believe it will be gradually paid back as her tax free accumulation builds back up.

jem16

Lokolo wrote: »

£1000 would take you over the tax free accumulation for 2/12 based on the figures.

£10660 allowance divided by 12 gives £888.33 for each month. Two months would be £1776.66.

OP's daughter earns £5200pa so £433.33pm. Two months would be £866.66 plus bonus of £1000 so £1866.66.

Tax would therefore be due on £90 at 20% so £18. Would £18 have made a difference to her booking the holiday or not?

If she continue with the salary of £5200 I believe it will be gradually paid back as her tax free accumulation builds back up.

Should be repaid the following month ( assuming no Mth1 suffix ) as tax-free allowance would then be £2665 and the daughter would then have gross taxable pay to date of £2300.

chrisbur

I suspect that it was the combination of tax and national insurance that came as a shock,rather than just tax.