Umbrella - Being paid twice in one month period

[the_duderama]

One for the accountants floating around here.

I'm currently working through an umbrella, and I've been stung for a large amount of tax, and I'm a little unsure of where i stand, and i revoles around monthly tax periods.

I worked the normal 20 days in September, period from 1/9/08 to 28/09/08, was paid on 3/10/08, then worked again the normal 20 days from 29/9/08 to the 25/10/08 and was paid on the 31/10/08. Now the pay for the October period was consdiderably less then the pay for the September period, even though I worked the same number of days at the same rate.

I contacted the umbrella and they advised that this was due to me being paid twice in the same tax month, so my tax band has increased(because i was paid double what i would normally get in a 1 month period). Fair enough, however my current month runs from the 26/10/08 to the 30/11/08, meaning that i wouldn't get paid again until the 5/12/08.

Now given that i wouldn't be paid for the whole of November, would i be due a refund of the additional tax for being "paid twice" during the October period?

I did ask the umbrella but the woman i was talking to wasn't very helpfull, all she did say it would "balance out", whatever that means.

[minstrel]

It should all balance out next time you get paid i.e. you will get a refund of the overpaid tax.

[Beefy198]

Your brolly is spot on. You think it's any different for permies who are suddenly paid four weekly and sometimes are paid twice in a month?

[LisaContractorUmbrella]

In each pay period, in your case each month, you will receive a tax free allowance which is based on your tax code. For instance with a 603L tax code you will have an allowance of £502 per month on which you will not pay tax - your earnings above that will be taxed at 20% up to £34800 and then at 40% for anything over that figure. Your tax free allowance can only be applied once in any payment period so, if you are paid twice in one month, the second payment will automatically be lower than the first even if your earnings are the same.

HTH

[the_duderama]

Your brolly is spot on. You think it's any different for permies who are suddenly paid four weekly and sometimes are paid twice in a month?

I have no idea, hence why i asked the question.

So if I understand Lisa correctly I wouldn't be due a refund of the addtional tax in the next period? I undertsand how it can look to the hrmc that i am earning more in that period, but surely it would average out over the year?

[Moscow Mule]

I have no idea, hence why i asked the question.

So if I understand Lisa correctly I wouldn't be due a refund of the addtional tax in the next period? I undertsand how it can look to the hrmc that i am earning more in that period, but surely it would average out over the year?

You will skip all payments in November, therefore this tax free allowance will be carried over to December (when you next get paid). You'll get double tax free allowance applied to the first payment in December so it should balance out in the end.

[LisaContractorUmbrella]

I have no idea, hence why i asked the question.

So if I understand Lisa correctly I wouldn't be due a refund of the addtional tax in the next period? I undertsand how it can look to the hrmc that i am earning more in that period, but surely it would average out over the year?

It may be that you would pay less tax in the following month depending on your earnings. PAYE works on a cummulative basis so if your earnings are £1000 per month PAYE tax will be applied to £12,000 i.e. your monthly earnings x 12 months. The tax for the year will then be divided by 12 and multiplied by the number of months worked so far. Tax paid in previous periods will then be deducted from the total tax due.

In your case - to simplify - if in month 1 to 4 you earned £1000 per month but then in month 5 earned £2000 your projected earnings for 12 months would rise from £12000 to £14400 (£6000 divided by 5 x 12). If then, in month 6, you earn nothing your projected earnings would revert back to £12000.