Tax on backdated pay

nma92

I work for the NHS in Scotland. We recently received a new pay deal and as result, we’re entitled to backdated pay.

I left my previous NHS health board in Scotland and moved to a new one just before the pay deal was agreed but was advised by my previous health board I would still receive the backdated pay I was entitled to.

I've now received my payslip with the backdated pay and have been given a tax code which states I’ve used up my personal allowance. Would this be correct or should I have been taxed at the rate I would’ve been during the period the backdated pay covers?

Nebulous2

What does your payslip actually say for your tax code? 

If you have wages from your new employer it is likely you have received any remaining personal allowance against those, so back-dated money from a previous employer would all be subject to tax. 

One good thing is we are at the end of the tax year, so if you have overpaid HMRC should identify and rectify that quite quickly. 

JCS1

Seem to recall that payments after someone has left should be at BR tax.

Dazed_and_C0nfused

JCS1 said:

Seem to recall that payments after someone has left should be at BR tax.

It's actually 0T but for most people there wouldn't be any difference on a bit of back pay.

nma92

The tax code is S0T. I knew the back pay would be taxed, but wasn’t made aware that it would be taxed so highly. So just wanted to check if this was correct or not.

Dazed_and_C0nfused

nma92 said:

The tax code is S0T. I knew the back pay would be taxed, but wasn’t made aware that it would be taxed so highly. So just wanted to check if this was correct or not.

S0T means that all the different Scottish rate bands can be applied (if the amount is large enough) but no tax code allowances will be used.

It may well be correct but it does depend on your total (taxable) income for the tax year in question.

If you post the taxable amount and tax deducted from that payment along with which tax band you think you are in (19, 20, 21, 41, 46%) then it should be easy to get a good idea.

Savvy_Sue

I'm fairly sure that all payments after leaving are taxed in this way, ie no allowances applied. And if you think about it, that makes sense: how can a previous employer possibly know your current tax liability? You may have gone on to a job at twice the pay, or you may have no taxable income at all.

So you need to put all your earnings into a tax calculator, see what tax is due, compare it to what you've paid. Then contact HMRC if you've over or under paid tax - or wait for them to notice, which they will.

Marcon

nma92 said:

I work for the NHS in Scotland. We recently received a new pay deal and as result, we’re entitled to backdated pay.

I left my previous NHS health board in Scotland and moved to a new one just before the pay deal was agreed but was advised by my previous health board I would still receive the backdated pay I was entitled to.

I've now received my payslip with the backdated pay and have been given a tax code which states I’ve used up my personal allowance. Would this be correct or should I have been taxed at the rate I would’ve been during the period the backdated pay covers?

Assuming your annual salary is in excess of the personal allowance, then I think you'll find it comes to the same thing. You'd have received your 'normal' monthly pay (which would use up the whole of that month's personal allowance) and then anything on top of that would be wholly taxable. That's all that has happened here; there is no personal allowance to apply to backdated pay.