Tax Free 30K redundancy reduced due to Company Error?

dothenumbersaddup

Hello, please could someone with payroll expertise help?  I left a role and received my final salary at end Dec. I was due to receive 30K redundancy pay tax free as part of the companies Jan payroll run.  They’ve just advised they have processed my usual salary net of tax in error for Jan. To correct this they intend to pay me the 30K in February run after deducting the Jan salary paid in error. I’m worried that by them doing it this way, and because I won’t have any taxable earnings in Feb, they will be deducting Jan salary gross, whereas I was paid it net.  Therefore I will loose out and won’t get tax relief on the full 30K?  Any advice most welcome?

jimmo

Sorry to see you have not had a reply from anyone with current knowledge, mine is very dated.

As I understand the current "Real Time Information" system (RTI) it is perfectly feasible for your employer to correct their mistake now or make a correction on the next payroll run. The following link explains their options.

Fix problems with running payroll: You paid your employee the wrong amount or made incorrect deductions - GOV.UK (www.gov.uk)

Your problem will be ensuring that they do it correctly.

On the face of it you should have nothing to worry about but you know who your employer is and maybe have your own opinion about their payroll abilities.

Please bear in mind that its not just tax you are concerned with here. There is also NIC and perhaps Student Loan repayments. PAYE tax normally works on a cumulative basis which often means that a mistake one month is automatically corrected on the next payroll run. NIC works on a pay period basis and there is no automatic correction in the next pay period.

You also need to bear in mind that the cumulative tax basis means that with no taxable pay for January and February you are probably entitled to partial refunds of the tax you suffered whilst working.

In February you will be looking for: tax free redundancy money of £30,000 plus 2 months' worth of PAYE rebates less the net amount paid to you in error in January.

I can't really judge how much you already know about tax but if you can't follow the above you will need to give your taxable pay to date, tax to date from your December payslip and your PAYE code number.  Also did your redundancy package actually total exactly £30,000 or is there more (taxable)? If so , how much?   

dothenumbersaddup

Hi Jimmo, thanks for responding. I think you’ve hit the nail on the head!  Will the payroll department process this correctly?  I am due about £600 over 30K so will need to take this into account when I look at the February pay slip.  My plan is to ask to see the payslip as soon as payroll is run, so there is time to correct any errors before the month end.  Thank you again.

dothenumbersaddup

Hi Jimmo, I heard from my employers today. Apparently they have issued a P45 after January’s payroll was run even though they are due to deduct a months salary in Feb?  They say it’s up to me to sort out with HMRC!  I’m not sure how this leaves me but suspect I could run into a load of hassle and possibly never recover the extra tax. Maybe I’m being to negative though!

[Deleted User]

Well - seeing as you have now left and your mod prospects are unaffected you may wish to complain to HMRC. See below under ‘Making an Enquiry’. In my opinion, your employer is entirely at fault and is fobbing you off - not good!

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/366615/employer-errors-deduction-paye.pdf