Backdated Pay Rise

Imlay · 19 April 2019 at 9:22AM

Good morning everyone,

I am looking for a wee bit of help to work out what I will receive when I get a back dated pay rise as I am unsure of how they work this out. Is it the increase calculated each month after deductions ? Or do they work it out as a lump sum and then calculate the income tax, national insurance and pension contributions?

In 2018/2019 I earned £41 418 gross salary and for this period my salary will now increase to £42 660. I have also received a pay rise this April taking my gross salary to £45 645.

I am expecting the back dated pay rise in either this month's pay or next months.

I live in Scotland.

Thank you in advance for your help.

Dazed_and_confused · 19 April 2019 at 9:31AM

You will be paying 41% on it all.

It will be taxed in the month you receive it just the same as any normal salary.

One caveat is that "gross salary" has no relevance really as far as tax is concerned, you need to know your taxable salary/pay as would be reported on your P60. This can often be lower than your "salary". If this affects you it might be you only have 21% tax to pay on some of it.

Imlay · 19 April 2019 at 9:37AM

Thanks for your help. 41% on it all is not as nice I had originally hoped but I wanted to check to make sure before I got excited about the additional money!

Dazed_and_confused · 19 April 2019 at 9:43AM

If you are in a "net pay" pension scheme (taxable pay would be less than "salary") the tax will be slightly less as not all of it would be taxable.

But then you have the pension deduction.

And probably 12% National Insurance as well although some might be 2% depending on exactly how much is paid all in one month.

jimmo · 19 April 2019 at 9:40PM

"Received" does not necessarily mean when you were actually paid.
It can also mean the date you became entitled to the increase.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42260
As you are receiving pay rises for both 2018 and 2019, more or less at the same time, that begs the question of when you became entitled to the 2018 raise.
In simplest terms if the delay was an oversight you were probably entitled during 2018/19 and should be taxed accordingly. If the delay was caused by long negotiations or a delay in obtaining relevant information such as your employer's accounts then you probably became entitled when the amount of your rise could be determined or on the next payday.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42292
The same arguments apply for PAYE.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42240
If so it would probably be better to try to ensure your employer operates PAYE correctly. My knowledge of PAYE is very dated and there are others on here who may be able to advise.

Backdated Pay Rise

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