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Occasionally umbrella employees may find themselves being paid more than once in a single tax period, in this article we explore why this may happen and what the consequences of it may be.
The tax year runs from the 6th April to the 5th April and is made up of separate tax periods, the most common of which are either weekly or monthly.
A weekly tax period begins on whatever day the 6th April falls on. So, in the 2023/24 tax year the 6th April fell on a Thursday, so a weekly tax period for this year will run from Thursday to Wednesday.
A monthly tax period runs from the 6th of one month to the 5th of the next.
Tax periods are important because they are linked to your pay frequency which could be weekly, fortnightly, monthly etc.
Typically, you will have a regular pattern of submitting a timesheet, getting it approved and receiving your funds. The date you receive your funds is your regular pay day. The day/date you receive the funds impacts the tax period you are paid in.
Complete work on the Friday, submit timesheet on Monday by 12pm this is approved Tuesday and you are paid Friday.
Complete work on the last working day of the month, submit timesheet by 2nd, approved on 3rd and you are paid on 5th.
If we receive funds on a different date to your usual pay day, it may result in you being paid more than once in a tax period, or it could also result in you missing a tax period.
The main reasons you would receive income more than once or not at all could be
Timesheets submitted and approved earlier than usual
Timesheets submitted and approved later than usual
Bank holidays
Agency/client payments fluctuate based on a number of working days after month end
You didn’t work in the period
You complete work on the Friday, submit your timesheet on Monday by 12pm, this is approved Tuesday and you are paid Friday in week 1. The following week, your timesheet is submitted or approved early and we receive the instruction to pay on Wednesday, which is still week 1 as the weekly tax period runs from Thursday to Wednesday. In this scenario the income needs combining and the tax liabilities need to be recalculated.
If we believe your agency has paid early due to a bank holiday for example, we will process the payment on your usual pay day. This avoids a situation where your net pay is lower and your tax deductions are higher than expected, as two payments would have been made in the same tax period with only one tax periods worth of allowances allocated, as per HMRCs guidance. If you would like to be paid early you can contact our Customer Care team who will advise of any additional taxes due on that payment and arrange for the payment to be released.
If we believe your agency/client has paid late, due to a mistimed payment and if you have allowances available in a previous tax period, we will try and back date that payment back to your usual pay day.
HMRC stipulate that an employee is only entitled to a certain amount of tax allowances / tax free pay in one tax period. So, if you are paid twice in one tax period the earnings have to be combined and the taxes recalculated to ensure enough tax is paid to HMRC for each tax period you are paid.
This may leave you feeling like you’ve paid more tax than what’s necessary. However due to how the UK PAYE system works it’s unlikely that this is the case. Most individuals are on a cumulative tax code which means your tax deductions are adjusted accordingly every time you get paid, so you would never end up paying more tax than is due in each tax year.
It’s worth mentioning here though, that some individuals may find themselves on a week1 / month 1 tax code which is a non-cumulative code. This means that any pay you’ve received, or tax you’ve had deducted within a financial year is not taken into consideration when calculating your pay. If this code applies to you, you should contact HMRC to identify why this code has been applied.
National Insurance (NI) isn’t cumulative though so you could miss out on NI allowance if you miss a period.
As always, our Customer Care team are on hand to answer any question you may have, you can contact them by telephone or email.
