Overtime Tax Implications?
Discussion
Hey folks,
Just a quick query. I get paid on a monthly basis (21st of every month), I am on an hourly rate and do regular overtime and shift work. However this month my overtime and back shift allowance was not put through as our new supervisor cocked up. Apparently there is nothing he can do to get it paid in this wage so it will be added to next month’s wage.
My question is how will this affect my tax as it will be the beginning of a new tax year next month? Is it worth fighting to get it paid before then or will it not make much difference?
Just a quick query. I get paid on a monthly basis (21st of every month), I am on an hourly rate and do regular overtime and shift work. However this month my overtime and back shift allowance was not put through as our new supervisor cocked up. Apparently there is nothing he can do to get it paid in this wage so it will be added to next month’s wage.
My question is how will this affect my tax as it will be the beginning of a new tax year next month? Is it worth fighting to get it paid before then or will it not make much difference?
Eric Mc said:
It will make no difference to your overall tax liability fort the current tax year. You will pay the same tax for 2017/18 on your overall wages for the year irrespective of the timing of the payments.
There can be an NI impact though as NI is calculated differently.
Over the course of the year I agree, but what about the impact of his April pay packet? Would his higher pay packet (April's pay and overtime, plus March's overtime) not cause his tax to be calculated as if that was a typical month?There can be an NI impact though as NI is calculated differently.
The reason I ask is that we had a problem where a number of stuff received a transitional lump sum in their April pay packet and it was taxed as if this would be their income every month. They did claw it back over the course of the year, but many people were unhappy that they received a lot less in April than they were expecting.
Next month's pay will be in the new tax year, so assuming no week 1 tax code the tax should sort itself out. From an NI perspective it might even be advantageous (depending on levels of pay). Unlikely to be a week 1/month 1 tax code too, as these are (usually) reset in a new tax year.
Eric Mc said:
It will make no difference to your overall tax liability fort the current tax year. You will pay the same tax for 2017/18 on your overall wages for the year irrespective of the timing of the payments.
There can be an NI impact though as NI is calculated differently.
Could it not make a difference though if the extra added to 2018/19 tax years pushes him into a higher tax bracket that he would not otherwise reach & wouldn't have reached in 17/18?There can be an NI impact though as NI is calculated differently.
would make a difference if OP pay to date was £10,000 and the OT was £1,000.... and they earn £11,000 total next year.
Paid correctly they would pay no tax eaither year.... but the mistake costs them £200 next year.
(Apologies if not correct!, and unlikely these are the exact numbers. But i had this situation one year).
Paid correctly they would pay no tax eaither year.... but the mistake costs them £200 next year.
(Apologies if not correct!, and unlikely these are the exact numbers. But i had this situation one year).
Tax is always calculated based on your total income for the tax year less your personal allowances. Whether you get that money once a year or 12 times a year makes no difference to the amount of tax you pay.
For the OP, the overtime looks like it will be included in his Month 12 pay packet (instead of Month 11) - therefore he should still end up paying the correct tax for 2017/18.
If for some reason it is not processed until Month 1 of tax year 2018/19, then he will probably pay less tax on the overtime than if it had been included in 2017/18 because personal tax allowances are higher for 2018/19 compared to 2017/187.
The only time this type of poor admin can make a difference is if the overtime amount earned pitches you inadvertently into a higher rate tax band in one year when it would not have done so if it had been allocated to the correct tax year. I've seen that happen with bonuses etc.
For the OP, the overtime looks like it will be included in his Month 12 pay packet (instead of Month 11) - therefore he should still end up paying the correct tax for 2017/18.
If for some reason it is not processed until Month 1 of tax year 2018/19, then he will probably pay less tax on the overtime than if it had been included in 2017/18 because personal tax allowances are higher for 2018/19 compared to 2017/187.
The only time this type of poor admin can make a difference is if the overtime amount earned pitches you inadvertently into a higher rate tax band in one year when it would not have done so if it had been allocated to the correct tax year. I've seen that happen with bonuses etc.
Eric Mc said:
The only time this type of poor admin can make a difference is if the overtime amount earned pitches you inadvertently into a higher rate tax band in one year when it would not have done so if it had been allocated to the correct tax year. I've seen that happen with bonuses etc.
It's happened to me when I've been paid for 56 weeks in a "year" due to accounting cycles. Gassing Station | Finance | Top of Page | What's New | My Stuff