Golden handshake - tax

[Andeh13]

This is probably one for you Saracen. When i joined my current job I was given a golden handshake for £2000, repayable if I left in my first year, 50% payable if I left within 2 years. I am now moving jobs to a new company and have been informed that my last salary will be minus the 50% golden handshake.

My worry is the fact that when I was given it, It was with my pay and it was heavily taxed. So when they deduct it form my salary it is my hope that they will deduct what it is I received AFTER tax, not before.

This seems fair, as otherwise I will be out of pocket by a few £100. Is this usually the way it works, or with it being a '£1,000' golden hand shake am I likely to loose out?

Thanks

[kalniel]

They will probably deduct the full gross amount because tax will have already been paid to the IRS - they as employers won't go to the effort of claiming it back on your behalf, but you can do so at the end of the tax year when all your incomes and tax outgoings are sorted out and you can balance up what is owed. IE you will not be out of pocket ultimately, but you might have to fill in a return to get back what's owed.

[Andeh13]

Damn, not terribly happy about that! I wouldn't even know where to begin when it came to claiming back the tax I paid for the golden handshake. ack

[kalniel]

Damn, not terribly happy about that! I wouldn't even know where to begin when it came to claiming back the tax I paid for the golden handshake. ack

http://www.hmrc.gov.uk/sa/

It's not hard, can be done online, and the telephone help is apparently actually helpful.

There are two years to consider - the year you got the payment. I'm assuming this is 2010/2011 financial year, and you might be due some back on that as well, because it was presumably taxed highly because of the high monthly rate. If at the end of the year your income didn't take you over the threshold for the next band then you should be able to claim a little back from that (effectively the golden hello will be taxed at your normal rate). You've still got time to file a return for that tax year.

Then there's this year 2011/2012. At the end of the tax year you can do the same, and work out if the deduction of the golden hello takes you down a bracket. My suspicion would be that actually the tax bracket won't change for this year - the deduction will be made to your gross salary payment so you'll be saving that amount of normal tax payment anyway.

So it's last years that you need to look at.

That's all just my personal opinion of course. Give them a ring and find out.

[peterb]

If the reclaim is deducted from your final payment, then the tax will be refunded at that time, and should be reflected in your P45. When you start work again, that will be taken into account by your new employer.

It might be complicated if you were taxed at different rates though, if the golden hello pushed ypou into the 40% bracket, but your subsequent pay didn't. That might depend on the terms of the payment, and talking to HMRC would probably be your best option.

[Andeh13]

I doubt the £2000 would have boosted me above whatever tax bracket I was on at the time so would presume I was taxed at the same rate on that.

Just received my final paycheck and they have deducted the full £1000, desbite the fact it was taxed when I received it. I have spoken to my old HR and payrole and they just blame each other and then hold their hands up saying there is nothing we can do. Both parties sound pretty inept though tbh.

My contract originally stated that I would received a £2,000 golden handshake...I did not receive this amount due to tax. The contract then said I would have to pay 50% of it back if I left which they happily claimed in full.


Really not happy with it, but I have no idea as to who I turn to. Would HMRC be the right way to go? Surely they would just say contact your employer - effectively HMRC have all the legit tax that was due?

[kalniel]

I doubt the £2000 would have boosted me above whatever tax bracket I was on at the time so would presume I was taxed at the same rate on that.

Just received my final paycheck and they have deducted the full £1000, desbite the fact it was taxed when I received it.

Deducted it from gross or net? If gross then it's all balanced out already because the tax saving on the reduced salary will equal the tax increase on the golden hello.

[Unique]

I doubt the £2000 would have boosted me above whatever tax bracket I was on at the time so would presume I was taxed at the same rate on that.

Just received my final paycheck and they have deducted the full £1000, desbite the fact it was taxed when I received it. I have spoken to my old HR and payrole and they just blame each other and then hold their hands up saying there is nothing we can do. Both parties sound pretty inept though tbh.

My contract originally stated that I would received a £2,000 golden handshake...I did not receive this amount due to tax. The contract then said I would have to pay 50% of it back if I left which they happily claimed in full.


Really not happy with it, but I have no idea as to who I turn to. Would HMRC be the right way to go? Surely they would just say contact your employer - effectively HMRC have all the legit tax that was due?

if you were paid gross, as it should have, you would have tax and NI deducted from the amount, resulting in you receiving a lesser amount. from what you say, that's what happened

if you have to return the payment, it should be deducted again as gross. this would reduce your overall gross pay and in turn reduce the tax and NI paid. the exact amounts of tax and NI may vary if the original payment was paid in a previous tax year

thus if your final pay was say £2500 gross for hours worked plus unused holidays etc, they would then deduct the £1000 due, to give you £1500 gross pay, and you would pay tax and NI on the £1500 instead of the £2500 you started with

if your employer hasn't processed it correctly and they have deducted the amount as nett, it is their responsibility to resolve, and they can do something about it. granted it will be a PITA for them, but that is their problem not yours. they should recalculate your final pay and give you back the difference if they have deducted £1000 nett instead of gross

if that's the situation, it's not a case for HMRC, they won't be able to do anything about it

you should firstly ask your employer to clarify with you if the amount is deducted as £1000 gross (which is correct) or £1000 nett (which is wrong and they will need to be asked to fix it). alternatively they may have calculated the tax and NI element on the £1000 and deducted the reduced amount as nett, but that wouldn't be right either, and it's a strange thing to do so unlikely

at the end of the day, if the employer made an incorrect deduction to your pay, they are legally obligated to resolve it

[Zak33]

if the £1000 has been taken off before your tax is deducted then you've not lost £1000 but only the taxed amount. so all is well.

Being paid £1000 LESS means you pay less tax too.

[Andeh13]

I have a nasty feeling they have taken it as net. Only because my HR rep who hasnt had to do this before just informed payrole to take off £1000 of my final pay check to account for my golden handshake. The graduate who left before me didnt even have to pay his back, they forgot to chase him up for it before he left. This has me worried about their level of competance at this.

I am struggling with the terminology a bit here im afraid. I am going to put the numbers down & then edit them out at a later date when this is resolved one way or another.


When I started I was on £25,000. My first paycheck included the £2,000 bonus. I hadnt previously worked that year (from April to sept)

During my time there my pay increased to £26,700 which is what it was when I left. I also was paid a days unused holiday for around £40-55 in my final month.

My finalk pay check was £560 (so taking off the holiday around £510) which makes sense as last month i received £1,516 after tax.

My pension was taken out of that at 6%, but I only started paying that 6-7 months ago.

Desbite being an engineer my simple maths & percentages is shocking, so I really struggle with this kind of problem. I would really be grateful if someone could advise me based on those numbers. From my limited knowledge the £1000 was taken off from the net amount, post tax... otherwise I would have received more then just the simple £1000 deducted amount of £510ish? Am I correct in that?

Many thanks guys

edit; just to add, my very first paycheck was for £3358.02, and that was for 3 weeks work (I started a week into september) and the golden handshake.

[Unique]

I have a nasty feeling they have taken it as net. Only because my HR rep who hasnt had to do this before just informed payrole to take off £1000 of my final pay check to account for my golden handshake. The graduate who left before me didnt even have to pay his back, they forgot to chase him up for it before he left. This has me worried about their level of competance at this.

I am struggling with the terminology a bit here im afraid. I am going to put the numbers down & then edit them out at a later date when this is resolved one way or another.


When I started I was on £25,000. My first paycheck included the £2,000 bonus. I hadnt previously worked that year (from April to sept)

During my time there my pay increased to £26,700 which is what it was when I left. I also was paid a days unused holiday for around £40-55 in my final month.

My finalk pay check was £560 (so taking off the holiday around £510) which makes sense as last month i received £1,516 after tax.

My pension was taken out of that at 6%, but I only started paying that 6-7 months ago.

Desbite being an engineer my simple maths & percentages is shocking, so I really struggle with this kind of problem. I would really be grateful if someone could advise me based on those numbers. From my limited knowledge the £1000 was taken off from the net amount, post tax... otherwise I would have received more then just the simple £1000 deducted amount of £510ish? Am I correct in that?

Many thanks guys

edit; just to add, my very first paycheck was for £3358.02, and that was for 3 weeks work (I started a week into september) and the golden handshake.

if your normal takehome pay is £1516 and you worked a full month and due money on top, then obviously they have deducted £1000 nett which is wrong

if your salary is £26700 and you worked a full month you were due £2225 gross for that, plus your holidays, and they should then have deducted the £1000 gross pay, making £1225+hols, and tax/NI/pens off that would give you about £1150 or so nett

normally (not always though) gross payments and deductions would appear on the left side of the payslip and nett deductions on the right side of the payslip under the TAX/PAYE and NI and pensions

you will need to speak to HR to get them to sort this, or your line manager. type them up an email and ask them to explain your final pay as you think the amount was deducted incorrect as nett instead of gross, leaving you underpaid by a few hundred quid and ask them to sort it immediately for your pay to credit on monday (or something, so you don't have to wait till next month, delaying your P45)

[Andeh13]

Thinking about it, actually i worked 3 weeks out of the last month because I left on the 21st. as a result my pay for that month have been around £1137 (0.75 * full months pay). On top of that I would have been paid that extra £50ish for the days holiday.

Now I am very confused. If they took the £1000 off that I would have received far less then the £560 I actually received? Does that mean I am actually wrong here & they have taken the money off the gross pay? ack, sorry guys...really appreciate you helping me clear this up.

[Unique]

Thinking about it, actually i worked 3 weeks out of the last month because I left on the 21st. as a result my pay for that month have been around £1137 (0.75 * full months pay). On top of that I would have been paid that extra £50ish for the days holiday.

Now I am very confused. If they took the £1000 off that I would have received far less then the £560 I actually received? Does that mean I am actually wrong here & they have taken the money off the gross pay? ack, sorry guys...really appreciate you helping me clear this up.

if your gross pay for the month before any deductions was £1137+£50=£1187 and they deducted the £1000 as gross, then it would give you £187 gross pay, so if you received £560 it sounds like you got a tax rebate of about £440 which is what i would expect to happen based on your previous earnings to date

so it sounds like it may be right after all. but to satisfy yourself you should ask your HR/payroll dept to explain to you. i'd suggest email them and ask them to detail in writing, so you aren't fobbed off verbally

as i said before, if the deduction is on the left on the payslip it usually means it's a gross deduction (although you can set software up to have deductions as gross/nett, before tax/after NI, after tax/NI, non NI'able, non taxable, etc, on the left, on the right, etc) so positioning on the payslip isn't 100% confirmation