lump sum salary how is it taxed

[petemurphy]

hi,

If someone got say 50k for april and then did not earn the rest of the year how would that 50k look like it was taxed on that payslip for april?

ie do you get your whole allowance or does the paye think you will be getting 50k every month and tax it heavily?

thanks

[trickywoo]

Depends on the existing tax code. They won’t adjust it in time to be taken account of at the time of payment so if it’s a standard code you’ll end up owing HMRC a wedge for it as they would be expecting to collect via PAYE which they can’t if no more money is incoming via PAYE.

[uknick]

A lot of payroll software assumes the £50k is your monthly payment and will deduct tax up to the marginal rate of 45% accordingly. Plus, the national insurance will be calculated at the higher rates.

This is how the civil service payroll software works. Many taking exit packages ended up having a large sum of tax taken at time of payment and then having to claim it back from HMRC. It came a as a bit of a shock to them.

Also, the claim can only be made during the tax year if you confirm you won't have any more taxable income for the year. If you can't do this, you have to wait until after the end of the tax year.

I suggest you check with your payroll team to see how the calculations are made.

[mcflurry]

uknick said:

Also, the claim can only be made during the tax year if you confirm you won't have any more taxable income for the year. If you can't do this, you have to wait until after the end of the tax year.

AIUI, if you are paid say £2000 the following month, the calculation would average the £52000 for the 2 months, and prorate over the rest of the year.

[uknick]

mcflurry said:

AIUI, if you are paid say £2000 the following month, the calculation would average the £52000 for the 2 months, and prorate over the rest of the year.

It would do something like that, therefore giving a large tax rebate in month 2. However, OP said the £50k will be the one and only payment in the tax year.

[anonymous-user]

My wife has just been made redundant and got a hefty final salary payment.

She's been massively over taxed as they've assumed it's normal.

She'll get it back but it's either piss about with HMRC or wait until next year's tax return. She's going to wait, as she doesn't need the stress

[uknick]

If she's not going to work again, or claim taxable allowances, this tax year, it's not really much stress. Just fill out the P50 form, send it off and Robert is your close relative.

https://www.gov.uk/government/publications/income-...


From what I recall it only took a couple of months to get the money back.

[Condi]

After the end of the tax year HMRC will sort it out and put a cheque in the post. You don't need to do anything unless you want/need the money sooner and are 100% positive you're not going to earn any more money this year. (Suspect that includes income from share dividends etc)

[anonymous-user]

uknick said:

If she's not going to work again, or claim taxable allowances, this tax year, it's not really much stress. Just fill out the P50 form, send it off and Robert is your close relative.

https://www.gov.uk/government/publications/income-...


From what I recall it only took a couple of months to get the money back.

She's going to potter about at a few things as self employed so there will be some income just not at the level expected, hence why it's not worth arguin