Salary advance. How does that work?

monkeyinbananafactory

Hi. my employer is willing to pay me salary advance to help with personal expenses.

Can anyone help me understand how can that be done ? are there any additional taxes to be paid by either side ?How big can the advance be ? very hard to find information about it.

MalMonroe

Here's some comprehensive information from this very site only four months ago : 

https://www.moneysavingexpert.com/loans/salary-advance/

Hope it helps. 

lincroft1710

It will purely be an agreement between employer and employee, so you should agree/negotiate the amount you want up to the maximum amount they are willing to advance. Income Tax will be deducted as normal and unless you earn approaching £50,000 per annum, would only be a problem if the advance took your income in any one tax year over £50,270.

Usually repaid either by deduction from next wage/salary or if large enough spread over several paydays.

Savvy_Sue

MalMonroe said:

Here's some comprehensive information from this very site only four months ago : 

https://www.moneysavingexpert.com/loans/salary-advance/

Hope it helps. 

that links to a very specific form of salary advance: we don't offer that, but we'd always offer an advance to anyone who joined us after the middle of the month, ie after the payroll's been finalised. 

We would work out roughly what you were due for your first month, deduct roughly what your NI and PAYE would be, reduce it slightly / round it down to a nice figure, then pay you that. 

In month two, we'd work out exactly what you were due for month 1, add on month 2, then deduct the advance in such a way that the tax and NI were correctly applied. 

The only other time we've offered an advance is when someone is regularly paying expenses and claiming them back, but struggling with the gap being paying out and claiming back. In that case we'd make an advance payment, which we'd then deduct from final salary payment. 

Don't know if that helps. 

Thrugelmir

monkeyinbananafactory said:

Can anyone help me understand how can that be done ? are there any additional taxes to be paid by either side ?How big can the advance be ? very hard to find information about it.

No additional taxes. The loan will be repaid from net pay.

The advance will be subject to negotiation. As will need to repaid over an agreed number of weekly/monthly installments. 

General_Grant

As long as the advance (= loan) is below £10,000 there would be no tax to pay nor reporting on a P11D.