Overpaid, Possible Tax Issue

finkyfoo

Hello all!



Wonder if you could help. Long story short the accountant at work had overpaid me all of last year. The owner of the company made an offer to just not pay me in January to make up for it. I am happy with this. However the accountant now wants to pay half of February's wage in January and the other half in February or I will end up with a tax rebate I 'don't deserve'



I can understand this may well be the case, but I want the issue dealt with ASAP and just not be paid in January. Also if the accountant does mess up I only have one month to work out instead of two months half pay. I don't trust her to get it right in honesty.



Would it make a difference if I was to be paid half Jan and Feb or not paid at all in Jan and back to full wage in Feb?


I am on a normal tax code, no repayments coming out. Basic money would be £1600ish January wage I would be losing.



Thank you in advance for any light on this!

Comms69

I suspect that there's two thoughts on this:


1. Pay nothing and process nothing - which would be fraud
2. Pay and deduct, thereby reporting correctly to HMRC.


I get the sense that everyone is leaning towards one, rather than two.

finkyfoo

This is what I'm a bit concerned with. I offered to pay the over payment straight back as a bulk amount, because I didn't trust for a monthly deduction to be calculated correctly. I just want it sorted ASAP, and by the book.

JCS1

But the tax rebate would be correct, as you have overpaid tax in previous months (with being overpaid)??

badmemory

If it is split it over 2 months it will reduce the overall NI payable.


ETA


All taken in one month NI = £107.76 approx
Taken over 2 moonths NI = £11.76 x 2 approx
Savings approx £84.24 based on £1600

General_Grant

Given that the tax year in the UK ends on 5 April, I don't see there being a difference in tax paid for the year if your refunding of the over-payment is taken in one or two (or even three) tranches as long as it happens before that date.

There would be, as badmemory says, be a saving in NI contributions if the repayment is spread out.

finkyfoo

Thanks all! I'm assuming the NI saving works in my favour? Sorry for the dumb question, just getting it correct in my head. What I owe and what my January wage is is maybe a difference of £300-500, in my favour. The issue was I had a pay rise in the middle of the year, which causes a little more trouble working it out, that's probably why the owner just offered me the deal instead if trying to figure it out.

General_Grant

finkyfoo wrote: »

Thanks all! I'm assuming the NI saving works in my favour? Sorry for the dumb question, just getting it correct in my head. What I owe and what my January wage is is maybe a difference of £300-500, in my favour. The issue was I had a pay rise in the middle of the year, which causes a little more trouble working it out, that's probably why the owner just offered me the deal instead if trying to figure it out.

And in your employer's favour.
Whereas tax is calculated on the amount received in a year, NI contributions are simply paid on the amount paid when it is paid.
So, because the first (I think about £700) part of a monthly payment doesn't attract NI contributions, less is paid over two months than for the same total amount in one. That's assuming you aren't near the upper threshold which it sounds like you are not.

badmemory

To explain a little more. Yout have £702 (or thereabouts) every month that you do not pay NI on, with your income you pay 12% on all the rest. If you take it all in one you have £1600 - £702 all charged at 12%. Doing it over 2 months you have £800 - £702 charged at 12% (twice). So splitting it in 2 you have £702 that you do not have to pay 12% on.


The accountants problem with doing it in one could well have something to do with paying you under minimum wage for one month!

finkyfoo

Thanks ever so much for the explanation. No, not near the upper threshold... Maybe one day!

finkyfoo

Thanks Badmemory, that makes a lot of sense. It could also have something to do with minimum wage, didn't think about that. I'll ponder over the weekend and sort it out on Monday with the company.