Back pay - can I ask for it to be paid in instalments for tax reasons?

[BerylStreep]

Myself and some colleagues have finally been told that we will be able to claim for being underpaid - in my case it will probably amount to about £10,000, which I have been underpaid over 4 years.

It was due to our PT status, and there has been an IT (not by me, a test case) which has found the employer discriminated on grounds of sex by not paying this salary.

It sounds like I am looking a gift horse in the mouth, but if I am paid all of this in one go, it will push me over the 40% tax threshold. When I did the work which wasn't paid for, I was well under the 40% threshold.

Is there a case for me to ask that it is paid in a number of instalments which straddle the tax years in order to reduce the tax liability, given that I wouldn't have paid 40% on the earnings had it been paid properly in the first place?

not an accountant but I would have thought a half decent payroll dept could make it clear the pay applies to the respective tax years so it wouldn't push you right over this year. Look out for how it is presented on your payslip and then challenge if necessary with the advice from a tax office.

Perhaps a call to the tax office for advice on how to handle this would be best.

No need to have it paid in instalments. It should be taxed as if it had been paid in the years to which it relates rather than as a payment this year. See here and pay particular attention to the third paragraph of the Equal Pay Act section. Your employer must break the lump sum down into separate sums for each of the years to which it relates and sort out how much tax should be paid for each year.

prh,

This is a fantastic link - thanks so much. I actually think that previous arrears have been paid incorrectly because of this, so I will check it out.