Backpayment of salary - tax query

sortedatlast

Hi all,

A quick question which I hope someone can help with! My employers have just discovered that I have been underpaid for the last 3 years and 4 months ( in essence a slight salary increase which never was processed properly). The amount underpaid is approx £6500. I have been advised that I will get this payment next month but that there will be deductions of approx £2500 due to national insurance and tax. Would this be calculated as though I had earned it this year and therefore would I be paying too much tax in this financial year and due any rebate?
If so, how would I request such a rebate.

Many thanks!

antrobus

sortedatlast wrote: »

Hi all,

A quick question which I hope someone can help with! My employers have just discovered that I have been underpaid for the last 3 years and 4 months ( in essence a slight salary increase which never was processed properly). The amount underpaid is approx £6500. I have been advised that I will get this payment next month but that there will be deductions of approx £2500 due to national insurance and tax. Would this be calculated as though I had earned it this year and therefore would I be paying too much tax in this financial year and due any rebate?
If so, how would I request such a rebate.

Many thanks!

According to HMRC;

The date the payment was made is the date that the tax has to be calculated. That's how PAYE operates.

However;

Where arrears of pay have been paid late and the customer believes they have paid too much tax they should contact their HMRC office with full details of the payment in question and ask the office to recalculate the tax due.

Or so it says here;
http://www.thisismoney.co.uk/money/experts/article-1643398/A-fair-way-to-tax-ambulance-back-pay.html

sortedatlast

Thanks so much for this link - is all a bit of a minefield! Really appreciate your reply!

chrisbur

Whether you will be paying more tax/NI than you would have done had this been paid at the correct time will depend on what you have been paid so far this year, what you will be paid to the end of the year and what you were paid in each previous tax year affected. Your employer's estimate suggests that you are paying some tax at 40% or possibly they are just over-estimating. I would suggest that you wait for the actual payment and then give the following details....
From the payslip with the back-pay, taxable gross, tax paid, tax code, month number, NI, taxable pay to date and tax paid to date.
An estimate of taxable gross pay for rest of the tax year.
For each of the past years affected the taxable gross and tax paid for the year, and the amount of back-pay that relates to that year.
From this it can be calculated if you have paid more, the same or less than you would have done with payments made at the correct time.