Back-dated salary

I was employed in mid March 2024 and my employer only paid my March payroll together with my April one by the end of April. This results in 1. Incorrect income tax split as my March payroll should be taxed in the tax year 2023-2024, but now it is taxed in the tax year 2024-2025 instead 2. Incorrect PAYE and NI calculation as they assumes my monthly salary is the sum of my March and April payrolls Can you advise what I can do?

Hi momoho2024,
The salary is taxed when paid to you and if paid after 5 April 2024 will be in the new tax year 2024/25. 
Thank you. 

 

My income in the previous tax year 2023/24 was below the Personal Allowance so I should not be paying any income tax for my March payroll. I should not be paying additional tax just because my employer delayed the payroll to me. And I found below article saying Legally, an employee’s tax liability on a payment of arrears arises in the tax year that the employee was originally entitled to be paid the extra amounts, not in the year that payments are eventually made. https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye70023 Doesn't it mean that the tax liability of my March payroll should be paid in March (previous tax year 2023/24) instead of the new year 2024/25?

Hi,

Normally the tax is deducted when the payment is received. As the payment is received in the current 2024 to 2025 tax year we cannot make a full review until the end of the tax year. You can contact our Income Tax team after the tax year end, 5 April 2025, to review.

Income Tax: general enquiries

Thank you.

But according to the Section 686 ITEPA 2003, a payment of PAYE income of a person is treated as made at the earliest of the following times— Rule 1 The time when the payment is made. Rule 2 The time when the person becomes entitled to the payment. https://www.legislation.gov.uk/ukpga/2003/1/section/686 So in my case, it should be Rule 2 (which is March 2024, tax year 2023/24). This largely over-estimate the PAYE tax I am paying and I cannot wait until the end of the tax year to review, as I'm suffering a large financial loss because of the over-payment. Thanks

Hi As previously stated the payment has been made in the current tax year, no action can be made until after 5/4/25 when your full income for the year is known. Thank you

It is a funny issue for me as HMRC has repeatedly made mistakes. For the 2023-2024 tax year, my taxable income is £100,900, so the tax due is about £31,000. However, HMRC calculated a tax amount of £530,000 due to backdated pay of about £40,000 plus this year’s income of £100,900. I have already paid about £43,000, but they are asking me for nearly £9,500.26 for the backdated pay. I replied to them that £40,000 is backdated pay and £100,900 is the current taxable income. Therefore, HMRC owes me around £13,000 as I have paid £43,000 instead of £31,000 this year. However, that £13,000 is a similar amount to the tax I need to pay for the recalculated tax for 2021-2022 and 2022-2023. So, the net balance is zero, and I am fine with this. However, HMRC replied that there is no tax due for the tax year 2023-2024, but I still need to pay them around £6,000 for the backdated pay issue, plus the initial £9,500.26. My understanding is if HMRC make mistake for a year ago tax issue based on the information, i can write to HMRC to write off tax. Acutally - the net balance is zero , hospital did the correct calculation already. How can i get help for this discrepancies issue

Hi,
We cannot view your personal records on the forum. Please contact our team for advice on your query:
Income Tax: general enquiries
Thank you.