Tax related payroll question

[leclerc]

A Friend of mine has been underpaid at work and so the company have agreed to pay out outside of the payroll date but the payment is subject to 32% tax. I am told that this tax issue rectifies itself at the next payroll date. Is that correct? And if their pay is below the threshold for tax, do they have to wait until April 2013 to get that money that was taxed refunded?

[teaboy2]

Re: Tax related payroll question

Sorry but where does the 32% tax come from? This years tax rate bands are below:

Income Tax rates and taxable bands

£0-£2,440	£0-£2,560	£0-£2,710
£0-£37,400	£0-£35,000	£0-£34,370
£37,401-£150,000	£35,001-£150,000	£34,371-£150,000
Over £150,000	Over £150,000	Over £150,000

* The 10 per cent starting rate applies to savings income only. If, after deducting your Personal Allowance from your total income liable to Income Tax, your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply. Non-savings income includes income from employment, profits from self-employment, pensions, income from property and taxable benefits.
The rates available for dividends are the 10 per cent ordinary rate, the 32.5 per cent dividend upper rate and the dividend additional rate of 42.5 per cent.

No idea why the borders on the table don't show properly i just copied and pasted the above from the HRMC website.

[enaid]

Re: Tax related payroll question

That's a new one on me, in the day you would pay shortages out of petty cash, then on the next pay day add the amount to that pay so as tax and NI could be calculated then minus the amount from the pay and put it back in petty cash.
People often thought they had been taxed twice but it is not the case and very hard to explain to some lol.

[teaboy2]

Re: Tax related payroll question

I agree enaid, thats what i used to do as well! Its more or less the same when giving someone a wage advance!

[wales01man]

Re: Tax related payroll question

Is it tax and N.I together equals 32%?

[teaboy2]

Re: Tax related payroll question

Most likely Walesman

[enaid]

Re: Tax related payroll question

Well done Wales NI is 12%
:beagle:

[TUTTSI]

Re: Tax related payroll question

National Insurance Contributions

£97	£102	£107
£844	£817	£817
£770	£770	£770
£110	£139	£146
£110	£136	£144
11%	12%	12%
1%	2%	2%
12.8%	13.8%	13.8%
1.6%	1.6%	1.4%
4.85%	5.85%	5.85%
1%	2%	2%
12.8%	13.8%	13.8%
3.7%	3.7%	3.4%
1.4%	1.4%	Abolished from 6 April 2012
£2.40	£2.50	£2.65
£5,075 per year	£5,315 per year	£5,595 per year
£3.05	£3.15	£3.30
£4.85	£5.10	£5.35
£12.05	£12.60	£13.25
£5,715 per year	£7,225 per year	£7,605 per year
£43,875 per year	£42,475 per year	£42,475 per year
8%	9%	9%
1%	2%	2%
1%	2%	2%
1%	2%	2%

[leclerc]

Re: Tax related payroll question

So forgive me for being a right old thickie, but is this Basic Rate tax(20%) plus 12% tax?

My friend usually receives under the threshold for tax so the tax that they pay on this, does that get readjusted with their next pay date? Or do they have to claim that back after April next year?

[wales01man]

Re: Tax related payroll question

If its PAYE tax is calculated on a weekly or monthly basis you tax free allowance accumalates each time yo get paid so if you earn 5000 pound and your allowance is 5000 each pay day its calculated how much your allowance is up to that date if your earnings are more you pay tax if less no tax its not the cae you get 5000 earnings before tax i suspect there wages system is not being used to pay the shortfall tax and NI will be deducted manually it will be returned next pay day NI is not refunde if you are paying it now

[enaid]

Re: Tax related payroll question

Income tax is 20% National Insurance is 12% so that makes 32%
They will deduct it initially (this will be because they dont know his details they are just going with the norm) and then when it goes on his next wage it will adjust and he should get it back that way.

[leclerc]

Re: Tax related payroll question

They do have their national insurance details as they have worked for the company a number of years. Normally they are paid monthly but because this is a payment outside of payroll, they have been told it is subject to the 32% tax. Their monthly income just falls shy of being taxable for anything which is why I am asking the question of whether they would get it back at the next pay date or in April 2013?

[enaid]

Re: Tax related payroll question

Jeeeeeeeez I am not saying they don't know their NI number but not everyone has the same tax code lol and it has to be done as they earn their money that's why its called Pay As You Earn lol
So say they owe him £300 they will only give him £204 as they have taken 32% off him £96 deduction.
I t will then work itself right on his next pay day as he doesn't pay tax as you say he will not be any worse off.