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30 posts

Geek


#261894 20-Dec-2019 09:10
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Question for the tax gurus, we have just been paid the next 3 weeks pays in 1 lump sum. Staff are grumbly as they reckon they pay more tax that way.

 

True?


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959 posts

Ultimate Geek


  #2379022 20-Dec-2019 09:27
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Did you alter your payroll system to allow for the additional time period?

 

AFAIK, ours is set to weekly and bases its PAYE calcualtions on the assumption that the amount paid if for 1 weeks wages, it then uses the tax tables to pay from that (Ace Payroll). If I paid 3 weeks worth of pay but didn't tell the system it was for 3 weeks, then yes, I'd expect it to take more tax.

 

I did ours on Tuesday, but processed 3 separate pay runs, forecasting each week until I return in January, that way each wage run was still in line with the payroll processing period.


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Master Geek


  #2379023 20-Dec-2019 09:28
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Quite possible if it pushes your annualised earnings (from a PAYE calculation perspective) into the next tax bracket. If this occurs you will (should) automatically get it back at the end of the current tax year. This, unfortunately, is one of the weakness of the PAYE system.


 
 
 
 


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Master Geek


  #2379027 20-Dec-2019 09:32
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Possibly true depending on how they processed it but it may not be the case. Assuming you are usually paid fortnightly then the three weeks may have been processed in two separate pays and paid to you in a single lump sum. Combining the two pays into one would save on bank fees. It could of also been processed as a non-standard three weekly pay in which the appropriate PAYE would of been deducted.

 

The only way to know for sure would be to look at your payslip or payslips for the payment and do the PAYE calc to see if it was actually taxed at a higher rate. Even if you were paid for three weeks it may not push you into the higher tax bracket.

 

If you were taxed higher due to the three weeks in a fortnight, it may also mean you get 1 week in the next pay fortnight so may pay less tax then. While it is annoying over Christmas and New Years to get less funds, any ups and downs will get sorted by the IRD when it does it's end of year calcs so you may get a refund eventually.


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  #2379039 20-Dec-2019 09:51
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sen8or:

 

I did ours on Tuesday, but processed 3 separate pay runs, forecasting each week until I return in January, that way each wage run was still in line with the payroll processing period.

 

 

This is the correct way to do it

 

Doing it as a single run may screw up anything with monetary floors and/or ceilings, such as ACC levies, PAYE income tax, Student Loan deductions.


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  #2379057 20-Dec-2019 10:33
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Surely your taxes are calculated at the end of the year on your actual earnings regardless of whether you pay PAYE or not?

 

If they overpaid, they will get refunded.






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Ultimate Geek


  #2379071 20-Dec-2019 11:04
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Kerry54321:

 

Question for the tax gurus, we have just been paid the next 3 weeks pays in 1 lump sum. Staff are grumbly as they reckon they pay more tax that way.

 

True?

 

 

not true.





BlinkyBill


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  #2379073 20-Dec-2019 11:11
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Geektastic:

 

Surely your taxes are calculated at the end of the year on your actual earnings regardless of whether you pay PAYE or not?

 

If they overpaid, they will get refunded.

 

 

doesnt help in the now does it, they will be out of pocket some money in the short term, which doesnt have to happen if the payroll department does the PAYE correctly


 
 
 
 




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Geek


  #2379123 20-Dec-2019 11:23
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Thanks for the responses, I confirmed with payroll that they had indeed set it as 3 weekly pays, so that part is fine. It was the bonuses that set things off!

 

 

 

"The bonuses use a different calculation though as they are an extra pay (EP).  It annualises the earnings for the last 4 calendar weeks (including the current payroll) adds the bonus on top to see what tax bracket it falls into.  The bonus is then taxed at that rate (the normal portion is still taxed at the normal calculation through)"

 

 

 

 


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