Underpaid wages to be taxed on higher rate

miss_inspiration

Hi all, hubby and I are in a bit of a quandrary. He has worked overtime recently to bring in extra money as his basic pay is low. Due to some processing error, his wages for that period have been about £100 short. He spoke to his manager, who referred it to payrole. They've gotten back to him to confirm the underpayment, and have said they can put the full amount in his next pay (end of this month) or pay him now but tax him 40% (he doesn't pay tax normally as his wages are so low).
So I am left wondering, can his employers tax the underpayment and leave us short? Or should they pay the full underpayment to him?
Many thanks for any advice received.

AJ1982

Depending on the amount earned in this month, the PAYE system may suddenly think you are now earning more money...

Eg - If you normally earn £2k per month (24k pa) you would be taxed as if you were earning 24k over the year.

If you suddenly get a good bonus / back payment etc, if may push you into the next bracket. Eg £2k bonus on top of £2k salary = 4k, 48k.

My advice would be to sit back and let the remainder of the year catch up with you. PAYE is normally pretty accurate (eventually) with such over/under payments.

Although I am not sure why they specifically stated "higher rate", unless hubby has 2nd job / weird tax code.

WestonDave

£100 wouldn't push someone who pays no tax into 40% so that doesn't sound right. Having said that tax is cumulative so sometimes in the earlier parts of a tax year (we are currently about half way) a big one off payment can cause tax to be deducted then (because not enough allowances have accumulated) and then be repaid as the allowances come into play in following months. It may be that making an extra payment this month means literally no allowances against the back sum (are we in fact talking about £1000 rather than £100?) hence the high tax take on it - even then the situation would sort itself out over the remainder of the tax year - with most of it happening on the next monthly pay run.

comeandgo

Can you wait until the next pay run at end of month? If it's only £100 and he does not normally pay tax then the most he should be taxed would be 20% with possibly a bit of NI to pay too.
Can the employers not give him a "loan" of £80 and take that from his next pay? As it was their mistake they should try and rectify it with as little problems to you as possible.
If you need the money now and do have to have the 40% tax it should sort itself out over the next few pays.

DandelionPatrol

If they are running their payroll correctly, take the money now, even if it is taxed. Any overpayment of tax should be refunded at the next payroll run.

General_Grant

Is his tax code being applied on a non-cumulative basis (designated as M1 or W1 against the number)? If that is the case, then he wouldn't get an automatic refund later but would need to ask HMRC to get a cumulative tax code to his employer or wait for a refund after the end of the tax year.

However, if he really does not pay any tax normally, even £10,000 at this point in the year is unlikely to move him to paying 40% tax for the one-off extra payment, though this could depend on the actual tax code being used. What payroll are saying doesn't sound right.

What is his tax code? Does it have M1 against it?

miss_inspiration

Thanks for all the replies, his tax code is the normal 10k-ish with the L at the end. Hubby only works part time so £560ish instead of £660ish is making things harder but not impossible (thank goodness for ebay!). Payroll have told him its company procedure to tax at the 40% rate, which made no sense at all to me, either! He's only looking at an income of about 9k this year.
His wage slip actually shows his overtime amount to be correct but it is his basic pay which is short.
A previous tax overpayment was made last year when hubby was on emergency tax, which he got back through as a cheque from HMRC a few months ago.
Really appreciate the feedback x

agrinnall

The company needs to review it's procedures, it can't just make stuff up, it has to follow the rules imposed by HMRC. I can't see any way in which taxing at 40% would be correct in this case, and if he feels confident that his job won't be at risk then he should consider making a formal complaint to the company, and if necessary to HMRC.

burnoutbabe

wouldtn't it be around 33% deduction? (for tax and NI)

Take the £60 now and get the other £7 next month (when they will in fact put throuygh the full £100, it will be taxed and then take off whatever they paid you already)

getmore4less

They can pay advances anyway they like but they can't tax any way they like.

Clarify what they really mean.

if it is all advances(against income) get 40% deducted just in case but then go through PAYE to get taxed properly that is fine.

They should cough up the real amount(estimated) as they are in error no tax and no NI as it is still under the threshold for both

dancingfairy

What getmore4less said. Sometime's in my current job I've seen this happen where people are either paid short one month due to an error or need a loan. It's not always possible to work out the exact amount owed to the person so it's best to knock off slightly more than tax and ni and give them the net amount, then when you run the payroll you take back the loan and repay the wages that should have been paid and the tax and ni straightens itself out.
If that's what they mean then fine, but as someone else has said they can't just make up tax rules as they feel like it.
It sounds like someone is confused somewhere along the lines.
df