Following a miscalculation around overtime covering a period of around 6 years, I am due to receive circa 40k in relation to unpaid hours. Roughly speaking, the 40k represents around 6.5k a year, evenly spread. I am a 20% tax payer with a salary around 38000 for each of the years in question. When this money is paid, likely to be in April 2017 at the beginning of the tax year, this will immeditaely put me in to the top band of tax for this year as this, added to this years 38000 salary will sky rocket me up.
I would be grateful if anybody could advise me on the tax situation around this back pay. I have heard different things around how it should be taxed, with some advising that it should be taxed at the rate that it should have been had it been correctly paid at the time. Thus some would be lower rate, some at higher. Some have advised that its tough luck and that its 40% tax and 12% NI and that I am stuck in 40% for the remainder of this year. This seems very unfair as I am being punished for something that is not my fault and although I will be slightly better off, I will still be financially penalised.
Any advice would be gratefully received...!
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