SAS doctor Pay Tax

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Tax and payment of arrears for SAS doctors

Doctors are still moving across to the 2008 Associate Specialist and Specialty Doctors contracts and in some cases they may be due tax arrears dating back to 2008.

 

Could this also apply to you?

The following guidance is also relevant to those who may be due arrears for other reasons.

Arrears of pay are earnings paid after the date that an employee should have received them and are usually paid as a lump sum.

Legally, an employee's tax liability on a payment of arrears arises in the tax year that the employee was originally entitled to be paid the extra amounts, not in the year that payments are eventually made. However, if arrears are paid in one lump sum in the current tax year then PAYE is due at the time of payment.

Therefore, to avoid drift into another tax band, and to avoid a loss of personal allowances, it may be in your interest to have payment allocated to appropriate tax years in which it arose rather than taxed as a lump some in current tax year.

 

Income tax rates and taxable bands

  2008-09 2009-10 2010-11
Starting rate for savings: 10%* £0-£2,440 £0-£2,440 £0-£2,440
Basic rate: 20% £0-£34,800 £0-£37,400 £0-£37,400
Higher rate: 40% Over £34,800 Over £37,400 £37,401-£150,000
Additional rate: 50% Not applicable Not applicable Over £150,000
  2011-12 2012-13
Starting rate for savings: 10%* £0-£2,560 £0-2,710
Basic rate: 20% £0-£35,000 £0-34,370
£35,001-£150,000 £34,371-£150,000
Higher rate: 40%
Additional rate: 50%  Over £150,000

 Over £150,000

* From 2008-09 there is a 10 per cent starting rate for savings income only. If your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply.

 

HM Revenue and Customs (HMRC)

HMRC have advised that employers should provide them with individual employees' details of what the payments are for each tax year. Finance should make the necessary arrangements to ensure HMRC are fully apprised of this essential information for each individual doctor.

However, we are aware that some Trusts are advising that they do not have the resources to comply with this. It is therefore essential that you request this information from your Finance Department and then it is your responsibility to contact HMRC as necessary.

 

Personal allowances

Income Tax allowances 2008- 09 2009-10 2010-11 2011-12 2012-13
Personal Allowance (1) £6,035 £6,475 £6,475 £7,475 £8,105
Income limit for Personal Allowance Not applicable Not applicable £100,000 £100,000 £100,000
Personal Allowance for people aged 65-74 (1)(2) £9,030 £9,490 £9,490 £9,940 £10,500
Personal Allowance for people aged 75 and over (1)(2) £9,180 £9,640 £9,640 £10,090 £10,660
Married Couple's Allowance - aged 75 and over (2)(3) £6,625 £6,965 £6,965 £7,295 £7,705
Income limit for age-related allowances £21,800 £22,900 £22,900 £24,000 £25,400
Minimum amount of Married Couple's Allowance £2,540 £2,670 £2,670 £2,800 £2,960
Blind Person's Allowance £1,800 £1,890 £1,890 £1,980 £2,100

From the 2010-11 tax year the Personal Allowance reduces where the income is above £100, 000 - by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age. 

These allowances reduce where the income is above the income limit - by £1 for every £2 of income above the limit.

For the 2008-09 and 2009-10 tax years they will never be less than the basic Personal Allowance or minimum amount of Married Couple's Allowance. Tax relief for the Married Couple's Allowance is given at the rate of 10 per cent.

 

Action required by each Trust or Employer

  1. A schedule should be compiled within each Trust following the calculation and payment of the arrears, detailing each individual staff member's name, staff number, national insurance number and a breakdown of the arrears due for the relevant periods 2008/2009, 2009/2010, 2010/2011, 2011/12;
  2. This schedule should then be forwarded by Salaries and Wages to an agreed contact in HMRC, however in practice this does not happen across all Trusts. The contact will be apprised of the relevant background;
  3. It is recommended that you ensure that you get the following information from your Trust if you have been paid arrears. This should contain your national insurance number and a detailed breakdown of the payments and the relevant tax years. This information will allow you to contact HMRC directly to resolve.

 

Summary and conclusion

Be aware, you could end up paying more tax than you should either through your tax band or personal allowances being affected, if the amount of arrears you are entitled to is paid in a lump sum when you move to the 2008 contracts.

In order to avoid this, contact your HR Department and ensure that you are advised of the total amount of arrears you will be receiving prior to transferring onto the new contracts. This information will help you decide whether or not to accept a lump sum or ask for the monies to be paid across years.

If you have already received arrears in the current year, there is nothing that can be done to change this from your employer's point of view. You will have to contact your local tax office at the end of the tax year to arrange for any refund of tax due.

To help you, the Trust will provide information explaining how much additional pay has been paid, the tax suffered and to what year it should have referred. You may need to request this information from Salaries and Wages within your Trust/Employer if it has not been given to you.

If you have not as yet been paid any arrears due, then Salaries and Wages should be able to deal with this as an Employer Amendment and recover the PAYE under a Class 6 Settlement.