Higher tax band if timesheets not approved on time

[petafin]

Hi,

As a IR35 contractor through an agency (not umbrella ), I am supposed to be paid weekly. I submitted my timesheets every week but my manager didn't approve them until 1 month so he approved 4 timesheets in one go.

Now I received the payment for those 4 weeks from the agency but they put me on the higher tax band because they assume it's a 4 week payment but as if it was for just one week of work. Is that normal? Is that legal? My agency says that because I wasn't paid weekly, this is how it works if I am paid a large amount in one go.

Can it be reversed? Why the agency cannot pay me 4 times a weekly salary instead of one big payment?

Thanks

[northernladuk]

Hi,

As a IR35 contractor through an agency (not umbrella ),

What's an IR35 contractor when it's at home?

I am supposed to be paid weekly. I submitted my timesheets every week but my manager didn't approve them until 1 month so he approved 4 timesheets in one go.

Even if you are inside is he still your manager? or is he your client?

Now I received the payment for those 4 weeks from the agency but they put me on the higher tax band because they assume it's a 4 week payment but as if it was for just one week of work. Is that normal? Is that legal? My agency says that because I wasn't paid weekly, this is how it works if I am paid a large amount in one go.

Why do people always assume when something happens they don't like the assume it's illegal?

Can it be reversed? Why the agency cannot pay me 4 times a weekly salary instead of one big payment?

Thanks.

Why do you want it reversed? How's that going to help you now?

Late payment is part of business. You could check your T&C's and rip them a new one around payment times but bottom line is you don't get paid without a signed timesheet. That is likely to be in your contract. This likes with your client manager not your agency so very little you can do.

[eek]

If your income tax is wrong - it will be fixed as the year continues or when you complete your self assessment form in April.

National Insurance is a different matter but the difference is actually very small.

[petafin]

Thanks for your answer. I guess I wasn't clear. I agree on all the stuff regarding that IR35 thing.

But regarding the payment, I understand I was paid only when the timesheets were approved. But the issue is that the agency put me on the higher tax band because they paid me the 4 weeks of work in one payment but counted this as one week of work (because they set my payroll on weekly payment) so they assumed that my weekly salary was actually as high as 4 weeks worth of work.

But the agency knows that those were 4 weeks of work, not just 1 week of work so did they have to put me on a higher tax band?

@eek: thanks, I replied before reading your message. NI was fine, it's the income tax that was too high. So I will need to carry that "loss" until self-assessment I presume as the agency doesn't seem to suggest they can adjust the next payments to pay less tax. Fair enough as long as it can be fixed. Cheers.

[Lance]

The agency don’t choose your tax band. Not does lumping 4 weeks into 1.
Your tax is calculated using PAYE. It automatically calculates the tax based on the week in the year, and the total amount paid so far in the year.
Lumping 4 weeks into 1 will not affect that calculation. Not unless there’s an error.

[ladymuck]

Did you give the agency a P45 and does it have your correct tax code on it? If not, they may be paying you on an emergency tax basis which will compound the issue.

If all that is correct then then the tax will sort itself out and you'll likely notice that the next payslip has a tax refund / reduced tax on it.

What you won't get back is any excess NI paid.

Regarding your other points - this is going to happen every time your line manager forgets to do their job. It's not illegal, it's just life. The agency is complying with the contract and not doing anything wrong.

It sounds like you'd rather the agency withhold payment, which would probably put them in breach of their contract and perhaps the minimum wage laws as you won't be being paid for the time you've worked (IANAL, just guessing here). Then there's also the extra admin overhead of manually processing payroll for one special person which I guess you're not willing to pay for.

[jayn200]

The agency don’t choose your tax band. Not does lumping 4 weeks into 1.
Your tax is calculated using PAYE. It automatically calculates the tax based on the week in the year, and the total amount paid so far in the year.
Lumping 4 weeks into 1 will not affect that calculation. Not unless there’s an error.

That's not true.

They will assume that the weekly pay for rest of the year is actually 4x what it is so you will end up paying higher.

This will get corrected later on anyway so no biggie.

[eek]

That's not true.

They will assume that the weekly pay for rest of the year is actually 4x what it is so you will end up paying higher.

This will get corrected later on anyway so no biggie.

100% wrong - no assumptions will be made, software just takes the input figures and calculates the amount of tax to be deducted.

[Lance]

That's not true.

They will assume that the weekly pay for rest of the year is actually 4x what it is so you will end up paying higher.

This will get corrected later on anyway so no biggie.

Rubbish.
That’s not how PAYE works. It’s all about total paid at a point in time.

[petafin]

Thanks all.

The agency does have the correct tax code (though there is the W1 at the end, for the emergency one).

They told me I was on the higher band because I received 4 weeks of salary as one payment. It was the first payment I receive as a new contractor so maybe they started the payroll for that first payment that's why they counted this amount as being my weekly one.

I look forward to seeing it corrected on the next payroll rather than having me to do extra calculation for the self-assessment...

Thanks.