PAYE, tax and back pay

[VivienneWestwoodsKnickers]

My work have finally paid up back pay owing for the last 7 months relating to my promotion.

Other promoted in the same round seem to believe we'll all be due some tax back later in the year.

I'm confused - I've been deducted for PAYE tax, NI and occupational pension, I assume in the proper proportions. Lower rate of tax.

Why would I be due any money back? Happy to post illustrative figures if that assists.

i suspect that with the back pay, your monthly amount is as much as the monthly amount of a higher rate and therefore you may have paid too much this month.

However if you are on a cumulative tax code (ending L with no W1 or M1 flag) it will right itself automatically throughout the year.

If you could post figures it would be more helpful.

Thanks Moany.

Payments
Pay basic: £3107.68
Miscellaneous gross payment: £3153.24

Deductions
Sports club/lease car: £102.06
PAYE: £1017.20
Pension: £460.18 (I pay 7.35% normally)
NI A: £418.62

Gross pay: £6260.91
Net pay: £4262.90

OK. Yes - that makes more sense.

Your normal salary is around £37k so you are generally a basic rate tax payer with £11.5 tax free per year.

This allowance is pro-rated so you get £957per month tax free. The basic rate is applied to earnings of £11.5k to £45k so £33.5k at 20% which is £2.8k per month.

Above that to £150k is 40% tax rate and again is pro-rated to equate to a monthly amount.

So your salary is broken down like this:

Gross salary - £6260.92
Taxed at 0% - £957
Taxed at 20% - £2,800
Taxed at 40% - £2,504

Now, as the year progresses the payroll software will realise that you won't be earning that amount every month, that your total salary will be within the basic level and it will reduce your tax liability over the year.

You'll have overpaid by about £500 and therefore most likely what will happen is that this 500 will be divided by the remaining 9 months of the tax year and your tax liability will be £500/9 less per month.

Hope that makes sense? It's a bit of a tome...

Oh I see, that's amazing, thank you very very much!! I couldn't get my head around it at all, but you've made it really clear. I really appreciate you putting in the time.

I shall look forward to the rebate or discount at some point!