Backpay / Tax Help!

thumpa28

Hi folks

Something proving a royal pain which I am hoping you tax experts can help me with. I have been going through a dispute with my employer (the NHS) about how I was assigned the wrong pay scale 3 years ago.

I have finally proved it and they have come to a grudging acceptance, but in typical fashion they don’t want to admit fault so they are just going to put all three years backpay into my pay packet and try and forget it. My annual wage is below the 40% threshold but the majority of that backpay put into my monthly pay packet would be over the threshold. I suppose that means a lot of that pay would go to the government.

Is there anything I can do tax wise? Or do I need to refuse this and just go to an employment tribunal (who would presumably take these factors into account)?

Any help appreciated.

Mary.

jobbingmusician

I appreciate your problem, and I think your employer is likely to do so as well!

Firstly, can you talk to them about it and see if they will pay some of it as an extra payment to last month's pay - at least you are in the right time of the year, and that would therefore count as 07-08 payments for taxable purposes.

Do you have a union you can involve?

The tax implications seem so clear to me that you do have a very good case. Please try talking to employers - it might also be worth talking to HMRC to see if they have any suggestions!

dmg24

I don't see the problem here. The employer will pay it in a lump sum, you will get stung for a lot of tax for one month, but by virtue of the PAYE system, your tax will even out over the year to ensure that you don't pay too much. If for whatever reason it doesn't, you can claim the excess tax back. Simple!

The NHS have gone through regrading for thousands of people, and all have been paid any monies owing in this way - why should you be any different?

Why on earth would you go to a Tribunal? You would be laughed out the room.

thumpa28

dmg24 wrote: »

Why on earth would you go to a Tribunal? You would be laughed out the room.

Thats a bit of a silly assumption to make on so little information, especially as youre talking about the pay correction that occurred at the end of the transition, and this is 2 years later. But as youre an expert on Agenda for Change, I was promoted during the transition period to Whitley Grade 8 but transferred to AfC on the grade I held in October 2004 (Grade 7), basically as though my promotion had never happened. Unfortunately for the employer they did not follow the National Agreement for pay on promotion and that is provable by referenece to the contract, so youre completely wrong but thanks for your contribution.

jobbingmusician that sounds like a sensible approach, I will discuss that with them, thanks for the idea

dmg24

Actually AfC is/was my area ...

You have got your resolution, the Trust have agreed to backdate your pay.

Unless your Trust are very slow, they will have closed off last years accounts, so backdating it to last year will not be an option.

So again, why on earth would you go to Tribunal?!!

thumpa28

I think we are going to go in a circle here.

Firstly, my pay from February 2006 (and backdated to 2005) to today has been two grades lower than I should have been paid under the AfC rules. I have raised this with them, pointing out the clauses in the national agreement and the fact that the only way they can justify their application of the contract (they use payment protection to reduce my pay grade after the transition) was if I could travel through time. They essentially use two effective dates, one taken from after I was promoted and compare it to one from before I was promoted.

They still maintain they have done nothing wrong but 'in the interests of fairness' they will put me on the grade I should have been paid and pay my backpay from February 2005 (my promotion date) to today.

However, if they pay me all three years backpay in one go, I will be paying 40% tax on it as my annual salary for this year is just below the threshold. Had they paid me when they were contractually obliged to, it would have made up part of my normal annual salary and I would have paid 22%.

I have talked briefly with my union and they are quite happy that i can justify an approach to the employment tribunal on the basis of the employer unlawfully withholding pay or some such, but seen as how this has been a 9 month grievance I am quite frankly fed up to my back teeth with it and was quite hopeful this had been resolved.

My only concern left is this 40% payment which seems to penalise me for their mistake.

fengirl_2

Tax law states that all employees are assessed on the amount of money PAID in the tax year. Your employer will not be able to go back and allocate some of your back pay to the previous month as this is the previous tax year which is now closed.

thumpa28

fengirl wrote: »

Tax law states that all employees are assessed on the amount of money PAID in the tax year. Your employer will not be able to go back and allocate some of your back pay to the previous month as this is the previous tax year which is now closed.

Sigh, thanks. Its just not looking good is it.

dmg24

thumpa28 wrote: »

Sigh, thanks. Its just not looking good is it.

Hd you bothered to read my post properly you would see that you are worrying over nothing:

The employer will pay it in a lump sum, you will get stung for a lot of tax for one month, but by virtue of the PAYE system, your tax will even out over the year to ensure that you don't pay too much. If for whatever reason it doesn't, you can claim the excess tax back. Simple!

thumpa28

dmg24 wrote: »

Hd you bothered to read my post properly you would see that you are worrying over nothing:

Ive just had a discussion with the office and hopefully all sorted now! fingers crossed anyway, thanks for your help all.

thumpa28

Sigh no luck with a resolution. Ok dmg, let me detail this precisely and you can then see whether I have something to worry about.

I earn roughly £38,000 a year which includes inner london allowance. Now I believe this puts me at the upper reaches of the 22% tax bracket. The NHS owe me around £8000 which they intend to pay in one lump sum.

So at the end of the year I will look at my total payments and see that with my salary + the backpay, in total I have paid 40% on a chunk of money that i should not have paid it on had it been paid to me when it was due. If you look at it month by month its not bad but I will start to pay through the nose at the end of the financial year. Is that not right?