Week 53 Paye And Nic’s - Further Guide To Paye And Nic’s For Employers

WEST BROMWICH, U.K. - April 4, 2013 - PRLog -- It’s normal for employees paid in week 53 in the previous tax year to have underpaid tax. This is because for each tax code there is a set amount of free pay per year. For weekly paid employees, you can calculate their weekly free pay allowance by dividing their yearly free pay allowance by 52. They then receive this amount of tax free pay every week. However, if an employee is paid 53 times in a tax year, week 53 is calculated using an additional weekly free pay allowance, and therefore the employee receives too much free pay. If this happens, your employees may receive a letter from HMRC and a form P800 Tax Calculation.

For example, a weekly paid employee earned £20,000 in the 2012/2013 tax year on tax code 810L and was paid in week 53.

810L free pay allowance for the year is £8109.40Weekly free pay
allowance – £8109.40 divided by 52 weeks is £155.95
By week 52, the employee has received the full £8109.40 free pay entitlement
 £8109.40

Week 53 – Tax is calculated with a weekly free pay allowance of £155.95
 £155.95

This means that in total the employee has received their full yearly free pay plus an extra week
 £8265.35

They have therefore underpaid tax and now owe to HMRC the tax due on £155.95

Amount underpaid – 20% of £155.95
 £31.19

Note: The calculation of tax in week 53 using a week 1 free pay allowance is the correct method required by HMRC. All week 53 tax calculations are carried out like this, regardless of whether you process tax using software such as Sage, manual calculations or using HMRC calculators. For more information, see page 11 of HMRC CWG2 (http://www.payrollservicescompany.co.uk/wp-content/upload...) – Employer Further Guide to PAYE and NICs .