Tax deduction for backpay

[andyasw]

My employer omitted to pay increments to my salary for 18 months until I discovered this. Had they paid the increments each month I would still be a basic rate tax payer.
Once I discovered their error I have had the lump sum equivalent paid to me but this then puts me into the 40% tax banding and an enormous tax deduction.

I know the tax office are powerless but do I have any redress with my employer as it was their error?

[wales01man]

Re: Tax deduction for backpay

Excuse me asking? did you did not notice the underpayment?

[ostell]

Re: Tax deduction for backpay

Is this just an enormous sum deducted in just one pay slip? If it is then it will most likely correct itself over the remainder of this tax year.

If it was a deduction on a month/week 1 basis then it will need the intervention of the tax office to get you a refund at the end of the tax year.

[andyasw]

Re: Tax deduction for backpay

No, I didn't notice the underpayment! Sounds bonkers I know but it was £150 a month.

[andyasw]

Re: Tax deduction for backpay

My HR people have said the same as ostell - this is the first month of the new fiscal year and effectively my monthly pay plus this backpayment makes it appear that my annual salary is 75K (I wish). Next month, and on subsequent months, I will receive the tax back as the cumulative total works out I'm not a 40% tax payer.

[ostell]

Re: Tax deduction for backpay

As long as you are not being taxed on a month1 basis ( look at your tax code) you might even get a rebate next month! The tax tables work on a cumulative basis.

[Guest]

Re: Tax deduction for backpay

I am assuming that your pay was your April pay , month 1 of the PAYG tax year . That is why you will have appeared to have paid a lot more tax, over the rest of the year this will even itself out. As Ostell has pointed out the tax codes work on a cumulative basis
If you tax code let you earn 12000 a year before tax, after month 1 you would have been allowed to earn 1000 , month 2 £2000 and so on. If you then earn 2000 in month one you would have a big tax bill but if you earn 0 in month 2 you would get a rebate

Tax seems complicated but isn't really as long as you think of it as a year long process

[andyasw]

Re: Tax deduction for backpay

I'd like to thank you all very much for your help.