Is holiday pay taxed differently?

arthurfowler

I have 15 days holiday owing and this will be paid out to me at the end of this month when I leave.

My main concern is that it gets taxed at the much higher rate because HMRC will think I am earning this every month.

I was told by HR that holiday pay appears on a different line on my payslip and shouldn't be hit by the higher tax rate. Is this correct?

getmore4less

Depends how much it is and your normal pay and pay to date

if your total pay(inc holiday) by the end of June is around/below £11.25k you should be OK.

if over then there should be 40% tax but you get that back if you claim JSA or get another job or do a P50.

You might save a bit on NI.

arthurfowler

Oh wow, are they that dynamic with their calculations? My net salary is definitely under 11.5k. My gross would be just under 11.5k because of the holiday pay being paid out.

I start my new job on Aug 1st. So you're saying if I am taxed 40% with this final salary, my first pay at my new role will be adjusted to reflect the extra tax I paid? If so that would be great, I thought I'd have to wait until the end of the financial year.

getmore4less

it may take more than a month depends how sharp you are with getting the P45 to the new employer and them processing it.


With PAYE you get 1/12 of the allowances each month, 40% tax kicks in at £45k June is month 3 of the year so 3/12th.

With a month gap you should get a bit(1/12 of £11.5k would be tax free) back anyway so don't treat the first couple of pay as the norm.

Dazed_and_confused

I was told by HR that holiday pay appears on a different line on my payslip and shouldn't be hit by the higher tax rate. Is this correct?

Utter rubbish, it might not hit higher rate for the reasons getmore4less has explained but you were being fobbed off by your HR people (or they haven't a clue).

The standard higher rate limit is only 43k if you live in Scotland.