Will I pay a lot of PAYE on this one off payment?

PencilBreathPencilBreath Posts: 3,643
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I was a team leader at tesco but they recently got rid of the role & one of the options was a one off payment of about £6.5k which is the difference between a team leaders wage & a general assistant over 2 years.

I accepted this & will be getting the payment in 5 weeks time along with my normal 4 weekly wage.

Will I have to pay 40% tax on this even though I am allowed to earn £10k or something before paying any paye?

Any one know much about this? Some people are saying I'll have to pay 40% tax on it which is a bit of bummer.

It may as well be in chinese if you go to the inland revenue website, I can't make head or tail of it.

thanks for reading

Comments

  • SnrDevSnrDev Posts: 6,094
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    Your annual tax allowance is £10600. You'll pay 20% on what you earn between that and about £41k, and 40% above that. If the £6500 takes you over £41k you'll pay 40% on the amount above that.

    ll figures are approximate, but that's the principal.
  • [Deleted User][Deleted User] Posts: 8,916
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    If you are not a higher rate taxpayer, then that payment will be taxed at the same rate as you are today.
  • SnrDevSnrDev Posts: 6,094
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    If you are not a higher rate taxpayer, then that payment will be taxed at the same rate as you are today.
    Not if the extra payment pushes him over the 40% threshold. If it does, the amount over the threshold is taxed at 40%.
  • [Deleted User][Deleted User] Posts: 8,916
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    SnrDev wrote: »
    Not if the extra payment pushes him over the 40% threshold. If it does, the amount over the threshold is taxed at 40%.

    Tell me about it.
  • gds1972gds1972 Posts: 6,613
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    Can't you just speak to your payroll department?
  • Keefy-boyKeefy-boy Posts: 13,561
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    Assuming you are paid monthly, you will get 1/12 of the annual tax thresholds added each month. If this sum is paid early in the tax year, which starts tomorrow, you will have little accumulated allowances and thresholds and you will at least initially pay 40% tax on a big chunk of the 6.5K.

    Provided you're not on a week 1 or month 1 tax code any overpaid tax will rectify itself as the available allowances and thresholds accumulate each subsequent month.
  • whitecliffewhitecliffe Posts: 12,010
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    It is very likely that if this additional payment is classed as salary you will pay 40% tax on part of your total salary for the month.

    This is simply because we are at the start of the new tax year and your allowances for tax are accumulated monthly. You will get all the tax overpaid back over the next month(s) assuming your normal salary is below the 40% threshold, this will be automatic you need do nothing.
  • YosemiteYosemite Posts: 6,192
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    Keefy-boy wrote: »
    Assuming you are paid monthly, you will get 1/12 of the annual tax thresholds added each month. If this sum is paid early in the tax year, which starts tomorrow, you will have little accumulated allowances and thresholds and you will at least initially pay 40% tax on a big chunk of the 6.5K.

    Provided you're not on a week 1 or month 1 tax code any overpaid tax will rectify itself as the available allowances and thresholds accumulate each subsequent month.

    Here speaks a man who knows what he is talking about. ;-)
  • walterwhitewalterwhite Posts: 56,564
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    It sounds almost like a redundancy to me. Are you sure it's taxable?
  • PencilBreathPencilBreath Posts: 3,643
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    thanks for the replies

    err except this one lol
    gds1972 wrote: »
    Can't you just speak to your payroll department?
  • gds1972gds1972 Posts: 6,613
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    err except this one lol

    Thanks. Why would you not be doing this be they are the people who pay your salary and take the tax on behalf of the government and will know the the actual answer to your original question.
  • pugamopugamo Posts: 18,039
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    thanks for the replies

    err except this one lol

    That was probably the most sensible response.
  • YosemiteYosemite Posts: 6,192
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    gds1972 wrote: »
    Thanks. Why would not be doing this be they are the people who pay your salary and take the tax on behalf of the government and will know the the actual answer to your original question.

    I suspect that relatively few staff in payroll departments understand the tax system.

    In large companies (like Tesco), the majority of them will almost certainly be nothing more than input clerks who enter the amount due to each employee, and the computer will then calculate the tax and NI deductions for them.

    In addition, since the new tax year doesn't start until tomorrow, they won't yet have downloaded the revised tax allowances provided by HMRC, so I doubt that they could do a "dummy run" even if they were allowed to/wanted to.
  • walterwhitewalterwhite Posts: 56,564
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    gds1972 wrote: »
    Thanks. Why would you not be doing this be they are the people who pay your salary and take the tax on behalf of the government and will know the the actual answer to your original question.

    You are assuming the people in the payroll department have an in depth understanding of the tax system.
  • YosemiteYosemite Posts: 6,192
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    You are assuming the people in the payroll department have an in depth understanding of the tax system.

    33 minute echo ...
  • walterwhitewalterwhite Posts: 56,564
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    Yosemite wrote: »
    33 minute echo ...

    And??
  • YosemiteYosemite Posts: 6,192
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    And??

    ... I would have acknowledged that a previous poster had already made a point with which I agreed.

    That's just me though - I don't participate in threads believing that I'm the only one with something worthwhile to say.
  • blueisthecolourblueisthecolour Posts: 20,123
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    So to summarise - you will almost certainly pay the 40% rate on the additional amount however it should all come back to you over the next few months in the form of lower tax on your earnings (or an actual rebate). There's a small possibility that you will need to apply manually for it if you have an unusual tax code.

    In terms of accepting the demotion - personally I don't think it's a good idea. Obviously you have to do what is right for your personal circumstances but career-wise it is never good to go backwards. Surely Tesco would either have another team leader role in the store you work at or maybe another one nearby? If not I personally would be applying for a similar role somewhere else.
  • Smokeychan1Smokeychan1 Posts: 12,048
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    It sounds almost like a redundancy to me. Are you sure it's taxable?

    You have to have been dismissed for it to count as redundancy.

    Here is a calculator that has a tab to add a bonus payment and you can see the comparison between the bonus month and normal months - http://www.thesalarycalculator.co.uk/salary.php
  • tealadytealady Posts: 26,262
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    Keefy-boy wrote: »
    Assuming you are paid monthly, you will get 1/12 of the annual tax thresholds added each month. If this sum is paid early in the tax year, which starts tomorrow, you will have little accumulated allowances and thresholds and you will at least initially pay 40% tax on a big chunk of the 6.5K.

    Provided you're not on a week 1 or month 1 tax code any overpaid tax will rectify itself as the available allowances and thresholds accumulate each subsequent month.
    Yep.
    Depending on which NI category you are in, you may pay a little more than normal for some part and only 2% above 3489.
    Pension may alter depending on your scheme.
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