Can my employer recover tax from my salary after overpayment?

[Toyingyu]

I work part time and my hours were wrongly input onto our system and should never have been approved. This goes back a few years. So basically they paid me a lump sum of a few thousand. Some of this was mine and about 4500 of it wasn't. They said they would sort it out so I kept the 4500 for them waiting for them to ask for it back. Obviously the month that I received the over payment I paid a large amount of tax, NI and pension.

They have now generated an overpayment letter which requests that I repay the 4500 as expected but it also includes the amount I overpaid is tax NI and pension which adds about another 3k to it!

I'm waiting to get a call back from payroll but it's payday soon so they're busy and it could be a few days time.

Why should I pay them back money on top of the 4.5k which I haven't personally received? That money went off to the tax man and the pensions people.

Can anyone who works in payroll help please?

If it’s their error, surely you shouldn’t be left out of pocket!

The correct approach is to deduct the net overpayment from net pay (i.e. after tax and National Insurance have been deducted).

The mistake should be corrected in the next Full Payment Submission sent to HMRC – this should show the correct payments to date and the correct net tax to date. The effect of this is that the PAYE deducted from the overpayment can be set off by reducing the next monthly remittance sent to HMRC. The employer should keep a note of both the reason for the adjustment and the method used to recover the net pay from the employer.

Ah, just seen it goes back a few years! I was basing that on being in the same financial year...

Hi no I was underpaid in 2016 so it goes back a few years. I work for the government, I don't know if that makes any difference.

They have a policy to recover every penny no matter how far back.

Your employer needs to work with HMRC to reverse this in each tax year. Then do a gross to net calculation to explain how much you are repaying.

Thanks, they've said someone will ring me tomorrow. They've literally just sent me a list of dates and figures which mean nothing to me at all. I've got a feeling they'll make me pay back the tax which has been overpaid and say I need to recover it from HMRC. Which will leave me in a lot of hardship. I can't wait til next April for that money 😩

What do you mean 'pay the tax back that has been overpaid'?

If you have overpaid tax then why would you have to pay more? You don't owe your employer tax. The HMRC probably owe you a refund if you have been overpaid by your employer.

But if it's from 2016 then the HMRC need to make the adjustment from that year.

You cannot be considered liable to repay the gross when you received the net.

If they are out of time to recover via HMRC then tough tits!

@BoredOfGrey22 the amount they are trying to recover from me is almost the same as the gross amount I was overpaid so I would assume they're holding me liable for the 3k worth of tax, NI and pension that was paid that month and then expecting me to try and recoup it. I have no idea how I will recover excess pension contributions and if that is even possible.

Have you spoken to your union?

Unless it put you into higher rate tax maybe ask if they can deduct it from your pay over an agreed number of months, I think it would take your tax down.

You need to call ACAS today to get proper advice.

Your work need to submit revised payrolls to HMRC for the years they are able for HMRC's system to even show you are due that money back. At the moment their records will show that you received a gross sum of the £4,500 plus tax, NIC, pension and therefore unless this is corrected with them they won't consider that you are due any repayment.

I also suspect your work is out of time to go all the way back to 2016, I think maybe 4 years max. They need to take advice but I would certainly not agree to pay them back the tax unless they are able to give you revised P60s for those years that have been processed by HMRC. Even if they are able to do this make the repayment conditional on you getting the repayment from HMRC.

Appreciate this is easier said than done if they just start deducting from your pay so you may also need to take advice. Good luck

Thanks for the responses. What a massive mess! It was originally started as my hours had been inputted wrongly in 2016 so I was owed a bit of money. Payroll then insisted that every year after that has to have the hours re inputted. Our system is very tricky and easy to get wrong so I would assume this is where the mistake was made.

I have spoken to my union rep who said to see what the phone call today from payroll comes out with. I will ring ACAS today as well. I just want this sorted out. I don't actually owe them anything apart from the 4.5k which I have here ready for them. Apart from that one month I've always been paid the same.