Reply to: NI - does it get refunded at end of year if you pay too much one month?

[WordIsBond]

So all this is about £10? Why not give her the first £10 from the next time you file for JSA and forget about it? The employer lost £13.80 through their mistake, BTW.

Note to self: remember this thread when deciding on which ones to expend mental energy in future.

Of general use to other contractors, a salary you pay is cumulative with other employment income in determining NI liabilities.

[psychocandy]

Ah right. NI is paid on anything over £672 a month.

The one month they screwed up and paid her less - £560 a month so no NI was paid. So in effect, £100 ish of the 'allowance' was wasted that month.

So they lumped in onto next months instead and NI was payable then.

By my calculations, it just means that the first £100 would have been NI free if done properly, but in the 2nd month it would have attracted NI. So only £10 or so difference.

Not the point though. Employer still trying to get it through and keep quiet about it.

So back to company point of view. If I pay her a salary as well is this cumulative or is each employment treated separately?

[WordIsBond]

Getting paid too much in one period can either benefit or hurt depending on the amounts, because the biggest marginal NI rate sits in the middle. The amounts are pro-rated for the period (weekly, monthly), but they are not averaged out for employees.

If you get paid a huge wodge in one week, your marginal rate is 2% - as opposed to a 12% marginal rate if averaged out.

That's why directors are averaged out, because a lot of savvy directors paid their whole salary for a year in a single week.

It benefits the employee, but costs the employer, to do it that way. One of my employees was in a position that we could have done this, I could have paid him twice a year, so I thought about it. But instead of the first £8K being exempt from employer's NI, it would have been the first £300 or so.

I could have reduced his salary to make up for it, he'd have still been ahead, but it would have been complicated and not worth that much.

[centurian]

Getting paid too much in one period can either benefit or hurt depending on the amounts, because the biggest marginal NI rate sits in the middle. The amounts are pro-rated for the period (weekly, monthly), but they are not averaged out for employees.

If you get paid a huge wodge in one week, your marginal rate is 2% - as opposed to a 12% marginal rate if averaged out.

That's why directors are averaged out, because a lot of savvy directors paid their whole salary for a year in a single week.

[psychocandy]

What happens if you are paid weekly?

It's calculated on either a weekly or monthly basis. If you use a monthly payroll and have two payments, the amount for the first will be based on (wait for it) the amount of the first payment.

If you have a second payment, presumably your payroll software will add the amounts of the two payments, calculate the NI as if it were a single monthly payment, deduct the NI from the first payment, and tell you the remainder is the amount due for the second payment.

If you use Basic PAYE Tools as your payroll software, it allows you to enter a payment as a mistimed payment, which means it is paid at a time other than when it was due, but the tax is determined by the date on which it was due. The NHS, of course, is probably not smart enough to have payroll software that does that, and if they do, they are probably not smart enough to use it properly. If they did, no extra tax would have been due.

If she kicks up a stink, and tells them she is going to contact her MP, the press, etc, they'll reimburse her for the extra tax. If that reimbursement is enough to kick her into tax liability for the month in which it is made, make sure she gets reimbursed for that, too. It would make a great headline in the Daily Fail -- "NHS Mistake Cost Me Extra Tax".

NHS payroll = completely useless. Not helped by the fact that they leave a lot to departmental managers to sort out which never ends well. A lot of the managers are too thick/cant be bothered.

Had a nightmare when she was off on long term sick getting her accrued leave sorted. Took months.

[psychocandy]

Paying her to lose all your lunch receipts, are you sure?

Yeh good point! She'll be getting her pay docked if she does it again :-) Or a good spanking!!!

[WordIsBond]

Hmm thats what I thought. So is it on a monthly basis? What happens if you get two payments in a month?

What happens if you are paid weekly?

It's calculated on either a weekly or monthly basis. If you use a monthly payroll and have two payments, the amount for the first will be based on (wait for it) the amount of the first payment.

If you have a second payment, presumably your payroll software will add the amounts of the two payments, calculate the NI as if it were a single monthly payment, deduct the NI from the first payment, and tell you the remainder is the amount due for the second payment.

If you use Basic PAYE Tools as your payroll software, it allows you to enter a payment as a mistimed payment, which means it is paid at a time other than when it was due, but the tax is determined by the date on which it was due. The NHS, of course, is probably not smart enough to have payroll software that does that, and if they do, they are probably not smart enough to use it properly. If they did, no extra tax would have been due.

If she kicks up a stink, and tells them she is going to contact her MP, the press, etc, they'll reimburse her for the extra tax. If that reimbursement is enough to kick her into tax liability for the month in which it is made, make sure she gets reimbursed for that, too. It would make a great headline in the Daily Fail -- "NHS Mistake Cost Me Extra Tax".

[Kenny@MyAccountantFriend]

I doubt it will cancel off. Instead the usual amount payable will remain payable next month as well.

[MrMarkyMark]

Well in this case sort of. But I was considering adding her as an employee to my limited so its relevant.

Paying her to lose all your lunch receipts, are you sure?

[psychocandy]

Won't help. It's calculated based on every payment independent of other payments.

Hmm thats what I thought. So is it on a monthly basis? What happens if you get two payments in a month?

[WordIsBond]

This is the NHS. Getting them to pay the correct salary takes 6 weeks of hassling them.

They randomly came up with a figure for august. No idea how they got it. Their excuse after 6 weeks - computer error! OK...........................

She should tell them she doesn't care if they pay her back for the extra tax, as long as their computer instructs the bank to make the payment. They can tell their auditor it was a computer error.

[psychocandy]

So, this post is all about your wifes PERM job?

Well in this case sort of. But I was considering adding her as an employee to my limited so its relevant.

Also clearing up what I understand about how NI works for me too.

[MrMarkyMark]

This is the NHS. Getting them to pay the correct salary takes 6 weeks of hassling them.

They randomly came up with a figure for august. No idea how they got it. Their excuse after 6 weeks - computer error! OK...........................

So, this post is all about your wifes PERM job?

[northernladuk]

Having a mental block with this. Im sure my accountant has told me this in the past but I aint asking him again or he'll tell me to sod off! :-)

Get a new one then. Paying a professional and ending up with free support on t'interweb because you can't approach him is a little bit daft.

[psychocandy]

Well, it will have cost them, too. But they should make her an extra payment to cover her NI cost, if it is their mistake.

This is the NHS. Getting them to pay the correct salary takes 6 weeks of hassling them.

They randomly came up with a figure for august. No idea how they got it. Their excuse after 6 weeks - computer error! OK...........................