Introduction to Income Tax and NICs Pay As You Earn and income tax
The regulatory limit applied only to prefix K tax codes until April 2015. From April 2015, the limit and its associated procedures are applied to all other tax codes as well.
5.10 Tax refunds
Tax refunds cannot be paid to an employee if any of the following conditions operate: • The tax code is being operated on the non-cumulative basis (Week 1 / Month 1 basis)
• The employee is involved in a trade dispute.
5.11 Holiday pay paid in advance
In calculating PAYE income tax, the tax week may be advanced by the number of holiday weeks being paid. This ensures that the employee benefits from the pay adjustment that would have been accumulated over the holiday period, as if the tax had been calculated separately each week. Example 4 An employee decides to take two weeks holiday, and on 6 September (Week 22) receives three weeks’ wages: the normal weekly wage plus two weeks’ holiday pay. The employer may advance the tax week and allocate the pay adjustment in respect of Week 24. This administrative arrangement may not be used where the holiday spans the end of a tax year. The tax week must never be advanced beyond the last week in the tax year. This arrangement must not be used where the employee is either leaving or retiring and will therefore not be returning to work after the holiday period. In such cases, the employee may start work for another employer during the ‘holiday’ and thus receive another pay adjustment for the same weeks.
5.12 Appendices
5.12.1 Abbreviations
AVC
–
Additional Voluntary Contributions
HMRC
–
HM Revenue & Customs
NPA
–
Net Pay Arrangement
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