Tax on back pay

Andelou1

I work for the NHS and currently have an appeal in for my banding, if successful they will owe me back pay for 4 years at the higher banding (approx 8k a year more before deductions). If this is paid in one sum it will put me into the high tax rate for the year, however if I’d been paid this when due I wouldn’t. Is there a way of correcting this or is it tough luck? Doesn’t seem fair if it is but know nothing with tax is! Someone has said I’ll land with NI contributions however it isn’t in the same amount as tax! Thank you 

Jeremy535897

Salary, whenever it relates to, is almost always taxable when received. However, there are exceptions. Have a read of:
https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye70023
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim02530
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42290

It will be a technical question as to whether what you are doing falls into these rules, or whether it is just pay in the current year. I recommend that you raise the question before any payment is made, as then it will be much harder to get anything changed.

Grumpy_chap

Andelou1 said:

I work for the NHS and currently have an appeal in for my banding, if successful they will owe me back pay for 4 years at the higher banding (approx 8k a year more before deductions). If this is paid in one sum it will put me into the high tax rate for the year, however if I’d been paid this when due I wouldn’t. Is there a way of correcting this or is it tough luck? Doesn’t seem fair if it is but know nothing with tax is! Someone has said I’ll land with NI contributions however it isn’t in the same amount as tax! Thank you 

When do you think the back pay is likely to be resolved?
If imminent and some can be paid this month and some next month, that may mitigate the amount of higher rate income tax liability arising.

Andelou1

Thank you. I’ll look at those links and good idea, I’ll raise the question before any payment is made 👍

Andelou1

Thanks, unfortunately it won’t be in this financial year. However at this rate it could be this time next year so could maybe see if they do half in one year and half in another?