Does PAYE allow for correction of accidental errors by the payroll dept?

[killingtime]

Hello,

A bit of background info; I'm a contractor working through an agency, and they pay an umbrella company. I'm an employee of the umbrella.

The umbrella payroll dept made a mistake. They've put a number of weeks though in one tax week so the paycheque is smaller than it should be (personal allowance spread over 52 tax weeks + higher tax banding). I've spoken with my 'employer' and have been told once a tax week is closed there is nothing that can be done. At all. The end.

I know that HMRC will use my P60 at the end of the tax year (~8 months) and work out any overpayment, then send a cheque if money is owed but I'd rather not wait if there are other options.

The question is; does the PAYE system allow for errors to be corrected during the tax year?

I find it hard to believe in this day and age that such mistakes are final. At the moment it's me v's the payroll dept and I'm no expert.

I know there's a PAYE for employers dept that you can telephone, but nothing for employees.

Thanks.

[VelcroPower]

If you have a cumulative tax code then the tax should sort itself out over the tax year.

If you have an L after your tax code rather than W1/M1 (i.e. 1185L) then your tax code is cumulative and will correct itself over the next few payments. If the error happened in the last couple of months then there is plenty of time between now and April for the tax to correct itself.

If you are on a W1/M1 tax code then you are not getting the cumulative personal allowance for the year and each payment in a tax period is calculated in isolation regardless of previous earnings - so you will need to speak to HMRC (0300 200 3300) and ask them to send a new tax code out.

You will, however, miss out on the multiple NIC allowances had you been paid over a number of weeks rather than in one week but there is nothing you can do about that I am afraid.

Finally it probably wasn't a mistake on the Umbrella's part, the Umbrella company will have more than likely received all that money from the agency in one go and then had to put it through in the tax period they received the funds.

[Maslins]

Mid year errors should be fairly easy to correct.

Errors noticed after the end of the tax year it's far more of a pain to correct (sufficiently so that our view would generally be to try to find another way of resolving the issue if at all possible).

Either way, it will depend on the software they're using, and training level of the staff involved. Remember that in the grand scheme of things RTI is still very new, so systems are still finding their feet a little.

Probably if you were to push back a bit harder they could fix it...but having said that at least from a PAYE perspective it should all work out the same if they just put through a corresponding correction next week/month.

[RyanDS]

If you have a cumulative tax code then the tax should sort itself out over the tax year.

If you have an L after your tax code rather than W1/M1 (i.e. 1185L) then your tax code is cumulative and will correct itself over the next few payments. If the error happened in the last couple of months then there is plenty of time between now and April for the tax to correct itself.
.

Actually the L will be on most tax codes. The W1 comes after the L, it doesn't replace it. eg it will be either 1150L or 1150L W1.

Personally I wouldn't wait for year end, simply contact HMRC and ask to be put on a cumulative code, hopefully whoever has paid the OP this year is up to date.

[Lance]

The umbrella payroll dept made a mistake. They've put a number of weeks though in one tax week so the paycheque is smaller than it should be (personal allowance spread over 52 tax weeks + higher tax banding). I've spoken with my 'employer' and have been told once a tax week is closed there is nothing that can be done. At all. The end.

PAYE works on the basis of assuming you get paid the same every week going forward. If you get a month in a week then you are taxed based on getting that same amount every week.
When you get paid less in the next week, as it's assumed that will be your pay going forward, you'll pay almost no tax (or no tax), and that will continue until it's evened out.
If you started after the beginning of the tax year it just won't be consistent but should still be correct at the year end.

So don't sweat it unless you are short of cash, then I'm afraid it's credit card time, to fill the few weeks gap.

[WordIsBond]

PAYE works on the basis of assuming you get paid the same every week going forward. If you get a month in a week then you are taxed based on getting that same amount every week.
When you get paid less in the next week, as it's assumed that will be your pay going forward, you'll pay almost no tax (or no tax), and that will continue until it's evened out.
If you started after the beginning of the tax year it just won't be consistent but should still be correct at the year end.

So don't sweat it unless you are short of cash, then I'm afraid it's credit card time, to fill the few weeks gap.

Well, mostly right. NI is not on an annual basis, so that may end up just being wrong.

[Lance]

Well, mostly right. NI is not on an annual basis, so that may end up just being wrong.

I must confess I don't understand NI and when I'm chancellor the first thing I'll do is scrap it (I don't pay it these days anyway so it makes no sense).
I would imagine that the OPs biggest hit is the income tax though and that should sort itself over the coming payroll period.

[killingtime]

I spoke with the personal tax helpline today and they looked up my payslip details for the weeks in question.

The PAYE system does allow for employers to take back any money paid in error. They can then make a 'correction' on the PAYE system and re-submit the correct details to HMRC. I suspect that this sounds like to much bother for my payroll dept. so they're just telling me - No.

I am on a cumulative tax code, so this error 'should' sort itself out on the next pay run. I was told it depends on how the payroll dept. handle the error. I won't get back the employers NI overpayment.

Thanks.

[Maslins]

I am on a cumulative tax code, so this error 'should' sort itself out on the next pay run. I was told it depends on how the payroll dept. handle the error. I won't get back the employers NI overpayment.

I would guess if there's a permanent NI difference caused by this, it would be in your favour.

Unlike tax, NICs are at a fairly high rate for low to modest earning people, then drop for the high earners. Therefore if one week due to a mistake you're paid far too much, and the next you're paid an equivalently reduced amount, then you may find you're better off overall. Reason being in the bumper pay month the top bit would likely be at 2% NIC, then when pay is reduced it may be at 12% NIC. Depends on what your declared income amounts were in the respective weeks.

[RyanDS]

I would guess if there's a permanent NI difference caused by this, it would be in your favour.

Unlike tax, NICs are at a fairly high rate for low to modest earning people, then drop for the high earners. Therefore if one week due to a mistake you're paid far too much, and the next you're paid an equivalently reduced amount, then you may find you're better off overall. Reason being in the bumper pay month the top bit would likely be at 2% NIC, then when pay is reduced it may be at 12% NIC. Depends on what your declared income amounts were in the respective weeks.

Quite a substantial benefit indeed.

Paid £1,000 for a week and you pay 89.76 (12% between 160 & 892 then 2% above that.) So £269.28 over 3 weeks.

Get paid £3000 in one week and you only pay £129.76.