NI on back pay

jul1e

Hi, hopefully I am on the correct forum for this question.
I work via an agency and am due to receive some back pay as I have been underpaid for some time. I am unsure how having this paid will affect NI contributions. I haven't earned anything for 6 weeks and usually when I start work my NI payments are zero or very small for the first week ( I am paid weekly through a payroll company and pay both employer and employee NI). Would I be better to have the back pay in one amount or spread over several weeks? Will it make any difference to the total NI that has to be paid? Also, the back pay will be for more than one tax year so will that make any difference? I don't think the amount of tax paid will be a problem as I won't be into 40% tax but do I need to do anything with regards to some of the money being from a previous tax year ? (still wouldn't be 40%).

I would be grateful for any advice.

anamenottaken

jul1e wrote: »

Hi, hopefully I am on the correct forum for this question.
I work via an agency and am due to receive some back pay as I have been underpaid for some time. I am unsure how having this paid will affect NI contributions. I haven't earned anything for 6 weeks and usually when I start work my NI payments are zero or very small for the first week ( I am paid weekly through a payroll company and pay both employer and employee NI). Would I be better to have the back pay in one amount or spread over several weeks? Will it make any difference to the total NI that has to be paid? Also, the back pay will be for more than one tax year so will that make any difference? I don't think the amount of tax paid will be a problem as I won't be into 40% tax but do I need to do anything with regards to some of the money being from a previous tax year ? (still wouldn't be 40%).

I would be grateful for any advice.

Though the pay may relate to work in a previous tax year, it will be received in this one and taxed with this year's earnings. (Think about it - someone is paid monthly, on the 10th of the month for the previous month and in April that will be mainly for work in the previous tax year but is taxed in the year it is received.)

To reduce NI contributions you would pay less if payment was spread out to take the weekly or monthly payment below the earnings level at which contributions are due.

chrisbur

National Insurance is calculated based on your earnings period, so if you are paid weekly you get a weekly allowance and anything above that is paid at 12% for most people. There is then an upper point where NI reduces to 2%. Currently under £157 a week no NI is paid and over £866 a week it is 2% NI.

No idea why your NI should be lower the first week unless you happened to earn less. That is all that will affect it.

Are you also earning as well as getting this back pay or is the back pay all you will be getting?
What charge do you pay pay for each payment made to you?
What is the back pay figure?
What is your wage figure if you are being paid?
Over what period would they be prepared to pay this back pay?

jul1e

Thank you for your replies.

I will try and answer some of your questions. I have just had a chat with the payroll company and they told me that for each week not worked the NI allowance carries over, therefore my NI allowance for my next pay should be close to £1000.
I am hopefully going to be earning but am not as yet and my weekly pay varies depending on how much work comes in.
The weekly charge for processing pay is 4% and is capped at £16
I don't know the back pay figure as yet as it hasn't been finally decided but should be a couple of thousand. They haven't given me much indication of how long a period they would be prepared to pay this back over.
Am I right in thinking I would be better to have it in one amount to use my full allowance and then anything over £866 would only be charged at 2%?

I am not too worried about tax as I doubt I will be near 40%. I always check my tax at end of year to make sure it's correct.
Are NI payments refundable if too much is paid overall over the year?

chrisbur

jul1e wrote: »

Thank you for your replies.

I will try and answer some of your questions. I have just had a chat with the payroll company and they told me that for each week not worked the NI allowance carries over, therefore my NI allowance for my next pay should be close to £1000.
I am hopefully going to be earning but am not as yet and my weekly pay varies depending on how much work comes in.
The weekly charge for processing pay is 4% and is capped at £16
I don't know the back pay figure as yet as it hasn't been finally decided but should be a couple of thousand. They haven't given me much indication of how long a period they would be prepared to pay this back over.
Am I right in thinking I would be better to have it in one amount to use my full allowance and then anything over £866 would only be charged at 2%?

I am not too worried about tax as I doubt I will be near 40%. I always check my tax at end of year to make sure it's correct.
Are NI payments refundable if too much is paid overall over the year?

National insurance allowance is never carried over if unused. This is how tax is operated but not National Insurance, possibly you or they are getting these mixed up. If your payroll dept are operating like this they should not be. In view of this anything I say is based on what should be done I cannot take into account anything your payroll dept. may be doing that they should not be doing.

Without more details cannot make any calculations regarding spreading the payment but you are correct that if paid a a lump sum provided your pay period is weekly then you would have some NI deducted at 2% rather than 12%.

NI is refundable if you pay more than you should but this is very unlikely to affect you on the details you have given. Paying too much NI would usually involve either an error in deductions by the employer or having two or more employments and paying more than the yearly maximum at 12%. It is unlikely this will apply to you; indeed if they are carrying forward NI allowances you are probably under-paying NI.

jul1e

Thank you chrisbur, I will call the payroll company again and double check what they said. I think I will ask for the back pay in one lump sum - if they will do it - as it should be over £866 and so I will not pay quite so much.

Thank you very much!

LittleVoice

Maybe the payroll organisation is treating weeks with no pay as part of a month so that the week's pay is treated as though it were a month.


Not saying that is right but there could be some logic to it.

chrisbur

LittleVoice wrote: »

Maybe the payroll organisation is treating weeks with no pay as part of a month so that the week's pay is treated as though it were a month.


Not saying that is right but there could be some logic to it.

Definitely would not be the correct way to do the first wage. Without seeing any figures no way of telling what is happening, if the OP would like to advise details of this wage on which little or no NI was paid and the following week's wage might be able to see what they are doing.

jul1e

I haven't received a wage for 5 weeks. I should get back pay which I am owed from work done before this period due to being underpaid. I should receive over £1000 I believe but haven't been informed of the precise figure as yet. If the NI allowance does not carry over it would seem to be beneficial to have this paid in a lump sum rather than in smaller amounts spread over several weeks/months when I will be earning over the weekly allowance (hopefully!)
I have been paid through this payroll company for several years and my NI record shows these as qualifying years for the state pension so I am assuming the correct amount has been calculated by payroll.