Help - overtime or time off in lieu

longwalks1

I need to find an additional 10 days holiday this year as Im travelling overseas for a family wedding.  I’ve got the option to take the time off unpaid at the end of the year.  

Or work overtime and have it paid to me as double time pay.
i can either work overtime now and save the extra money to cover my unpaid at Christmas.
Or, work overtime through the year for single pay and hours off in lieu.
im a higher rate tax payer.
is there an easy way to workout what’s best to do?  Im struggling with the tax etc and which option is better, financially 

DullGreyGuy

Are you close to £100k salary after allowable gross deductions like pension?

Getting double pay means you only need to do 5 days work to achieve your 10 days off. Working for time in lieu means needing to do the full extra 10 days. There may be a temporary change in tax due to the spike in earnings but this will come out in the wash when you are unpaid over Xmas

longwalks1

Sorry for the late reply DullGrey Guy, working away and family commitments kind of pushed this 'nice to have problem' way down my list. 
Plus my employers 'rules' have changed recently.

My options to cover the extended absence now are:

1)  Take it as unpaid at end of year, and every day overtime I work before then, be paid at double time.
2)  Every day i work overtime between now and then, take as single pay and single TOIL to use towards time off

My gross salary including shift etc, before overtime is approx £70,000.  

Im struggling to work out if I'll pay less tax either way, or is the amount negligible.  I know getting paid double now and saving it will earn me very little in interest, so it'll be tax that may be deciding factor.
Thanks again everyone

saajan_12

I don't think it'll make much difference..

For income tax, you work 5 days overtime / 10 days toil to offset the 10 days unpaid, so the total income in the 2025-6 tax year is the same 70k, so no difference there. 

For national insurance, you're already earning 5833 a month which is above the top NI threshold, so any overtime will be at the 2% rate. If you then earn less than 4189 in a month, then that difference is saving national insurance at 8%. Say in Dec, due to those 10 unpaid days, you earn £2692 less than normal, ie 5833-2692 = 3141 earned. 
- The first £1644 of that (5833-4189) saves NI @ 2% which is the same as the rate you pay extra during the overtime, so no difference.
- The next £1048 of that (4189-(5833-2692)) saves NI @ 8% vs 2% paid during the overtime. 

So you're saving 8% NI and only paying 2% NI on £1048 => difference of 6% x 1048 = £63 NI saved by working overtime and then taking Dec days unpaid, with everything else coming out even. If you banked the toil and used it in Dec, then there's presumably no change in your regular income. 

TLDR: Small NI tax difference is £61, better off by working overtime and then receiving less in Dec. IMO the much bigger difference is in only having to work an extra 5 days that way, vs 10days doing it via toil. Also the crucial thing you will need to be careful of is budgeting correctly so that you bank the overtime income for your December expenses.. if you don't and have to borrow money in December, that could more than scupper any benefit!