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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I should have been promoted in 2010 but there was a mistake

Resolved Question:

I should have been promoted in 2010 but there was a mistake by the promotion board and i have been overlooked for several years. My company has corrected the error and I am going to get two and a half years back pay, something like £25k. How will the tax be calculated and paid?

My current salary is £58k and is about to rise to £71k.
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

The pay arrears should be treated as if they were paid over the period to which they relate which will clearly cover several tax years. Take a look here for more information. Show this web page to your employer as soon as possible. If you don't and they deduct tax and NIC as if it were salary for 2014/15, you will have to wait until the end of the tax year to have the matter rectified.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.
Thanks.I took the document to work today but sadly it seems my company will be giving me a lump sum and leaving me to sort it out with the tax man :(
Expert:  TonyTax replied 3 years ago.

That is odd as well as technically incorrect PAYE procedure. If they are paying you gross, you need to get that in writing from them. You should then write to the tax office and inform them of the situation and that the payment needs to be spread over the tax years concerned citing the links I gave you.

Customer: replied 3 years ago.

Sorry, I should have been more specific. Tax will be deducted at source but all at the rate for tax year 2014/15. I won't know if the tax is right until I complete my tax return in a years time.

Expert:  TonyTax replied 3 years ago.
I see. That is one of the ways that the text in the link says it can be done I'm afraid.
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