Holiday back pay tax implications ?
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Sorry for any mis-understanding
Yes i am/was concerned about being pushed into higher tax band, but i think i will be ok on that one .
I dont want to avoid paying tax/NI , ideally wanted to minimise it.
Initially i was under the misguided impresssion that because the payment is a "settlement" following a tribunal, that it wouldnt be treated as taxable income :rotfl:0 -
Is this actually ‘wages’ or is this a settlement agreement? the tax implications are quite differentMar 24 - Mortgage Balance £249,794.45
Credit Card - £8,182.23 + £4,731.65
Goals: Mortgage Free by 2035, Give up full time work once Mortgage Free, Ensure I have a pension income of £20k per year from 20350 -
Ah I see you’ve answered this, if they are in fact giving you back pay I effect rather than a settlement then yes it’s taxable, you can most likely do an adjustment to previous years income if it relates to previous years. Will of course only make a difference if you end up in a different tax bracket by paying it all this yearMar 24 - Mortgage Balance £249,794.45
Credit Card - £8,182.23 + £4,731.65
Goals: Mortgage Free by 2035, Give up full time work once Mortgage Free, Ensure I have a pension income of £20k per year from 20350 -
Apparently another claimant has spoken to the legal firm involved in the case, and had it confirmed that the settlement is taxable, i need to speak to the firm anyway, so i will get this confirmed one way or the other.
After doing some calculations, its not going to bust me into the next tax bracket, so no disadvantage to pay it this tax year ( if confirmed taxable ) as Kerry said.0 -
My profits after expenses are usually around the 28-30K mark, so fall in the 20% tax band, i think the settlement figure may take me into the next tax band for this tax year.
Regarding making a pension payment, i am not currently contributing to one, and i understood that if i put a lump sum into a fund for pension purposes, hmrc would add the tax relief onto the lump sum ?
Not by much if it is 3 years holiday on that level of earnings.
Might be worth working out what what you will be paying.
Could take a month off as holiday.0 -
"Workers under direction". Don't remember ever seeing that phrase before but its a very long time since I did any Status work.
I get the impression that the Employment Tribunal has found that the workers are legally employees and in order to get around the ET ruling your "employer" is introducing new contracts in order to make you self-employed.
As you will be speaking to the legal team it might be worthwhile asking them to clarify what "worker under direction" means for tax purposes and do they know whether the "employer" will be operating PAYE.0 -
From the NI point of view, you will almost certainly be better off getting paid in one big lump sum as it will likely take you over the Upper Earnings Limit and so will only pay 2% NI on the excess.0
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Thanks for the feedback0
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"Workers under direction". Don't remember ever seeing that phrase before but its a very long time since I did any Status work.
I get the impression that the Employment Tribunal has found that the workers are legally employees and in order to get around the ET ruling your "employer" is introducing new contracts in order to make you self-employed.
As you will be speaking to the legal team it might be worthwhile asking them to clarify what "worker under direction" means for tax purposes and do they know whether the "employer" will be operating PAYE.
You have got the wrong impression then,,,
We were already self-employed before the tribunal judge ruled that we should be classed as workers under direction.
Even as workers under direction we are still actually self employed, use self-assessment etc, but we have extra rights including holiday pay.0 -
You have got the wrong impression then,,,
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim70005
If you use the accruals basis it is spread over the years when you did the work which earned the money.
I imagine you use the cash basis and are lumbered but I've been wrong before.0
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