Tax on a £3000 one-off lump sum from employer

Bolognese

Good Morning,

My employer are paying me a £3000 one-off lump sum in April as compensation for extra duties completed in the last year. This is opposed to an actual payrise, which they are unable to commit to as a result of the COVID pandemic.

Current Salary : £26,000
One-off Sum : £3,000

My question is, how will I be taxed on this when it is put in my April payslip?

Will it be like a bonus and taken at 40%?

Or am I right in thinking it will just even itself out through the rest of the financial year. April will be 1/12 of the tax that I should pay, so I will pay a lot that month. But then as my salary returns to normal in the following months, I will pay a bit less tax each month until it evens out before the financial year ends?

Many Thanks for your help.

Dazed_and_C0nfused

You are mostly right.

It will be taxed just like any other taxable pay would be.

As you are being paid it in month 1 of the tax year you are effectively earning at a rate of £62k (£26k x 1/12 + £3k x 12).  So higher rate tax will be payable on some of it, not all of it.

Move forward to month 2 and you get normal pay only so you are now earning at a rate of £44k (£26k x 2/12 + £3k x 6) so any higher rate tax paid in month 1 will be taken into account and reduce the tax payable in month 2.

Month 3 onwards you will be back to normal, with no adjustment required and just basic rate tax being paid.

Bolognese

Thanks very much 👍