From: Ronald Raygun 
Subject: Re: Tax and Overtime
Newsgroups: uk.finance
Date: Fri, 11 Jul 2003 14:10:33 GMT

Ian Diddams wrote:

> mail@mujja.com (Mujja) wrote in message
> 
>> 
>> I've got a chance to work overtime for 3 weekends in the next 2
>> months. I was thinking of submitting my claim form for all 3 weekends
>> together and get the whole amount payed to me in one go with my
>> regular pay. But then someone at work warned me I could end up paying
>> too much tax and I should split the clain over 3 months.
> 
> Assuming for now the overtime is to all be claimed within the same
> PAYE year, the overall amount of PAYE tax paid will be the same
> whether you receive the overtime payment in one hot, or spread out
> over several pay cycles.  It'll all come out in the wash, so to speak.

That's true enough, but the OP was keen on avoiding a temporary
overpayment, especially if it required hassle and waiting to put
right.

> Other than that the only benefit may be in NICs - but generally
> speaking I think I'nm right in saying that unless you are a very low
> income [1] you're better off paying NIC on one large sum than several
> smaller ones - someone will no doubt be able to give a more definitive
> answer to this srea

I missed that.  NIC is chargeable at only 1% instead of 11% on
earnings above £595 a week, and even if the employer is allowed
to account for NIC on a monthly basis instead of weekly, and
assuming the OP's basic salary of £2500pm, this means only the
first £78 OT each month would be subject to 11%, the rest at 1%.

Therefore, the NI element of the tax bill would be nearly £8 higher
by spreading the overtime over 2 months than by taking it in one go,
and a further £8 higher if spreading it over 3 months.