4 weekly payroll - 14 payments this tax year

Income Tax Implication on 14 pay periods this tax year

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Hi all

We have a 4-weekly payroll who will have 14 payments this tax year.

I have run a dummy payslip for one of the employees and the net pay is the same for the last 3 payments.

I am finding conflicting advise... does anyone have a link to something that I can send to our client to explain what has happened and what the implications could be?

HMRC advise - 

14 pay days in tax year 

Employees paid at regular four-weekly intervals may have 14 pay days in a year.

If tax is due from the fourteenth four-weekly payment, advise the employer to

Apply the Week 4 Free Pay Table on a non-cumulative basis

Enter ‘56’ in the box headed ‘Payment in Week 53’ on the form P14

Note the Deductions Working Sheet ’56 Weeks’

Brightpay Advise - 

A “quirk” in the tax system that occurs once every 20 years has resulted in Asda staff owing more than £12m in outstanding tax to HMRC.

The supermarket’s 170,000 employees were affected by the payroll anomaly that occurs for companies with four-weekly payroll systems, where 14 payments are made in a tax year rather than the usual 13. Most of the employees were paid 14 times between 6th April 2012 and 5th April 2013 – the 2012/13 tax year – rather than the usual 13 times.

The payroll provider, said: “This is an anomaly within HMRC and there is no means of getting round it by payroll providers.”

Following the incident HMRC posted advice on its website on “dealing with ‘week 53’ payments”. When completing a Full Payment Submission it says: “Do not change the final tax code to week 1 if the only reason you have used week 1 is to calculate a payment on week 53."

Thankyou :)

 

Replies (24)

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RLI
By lionofludesch
13th Feb 2024 11:15

It's every 28 years. Not "about 20".

There's no easy answer to this. Or the Week 53 problem. Using anything but the Week 4 free pay will give the employee an immediate hit in his pay packet. Collecting the underpaid tax over a year at least dilutes the hit in pay to a more manageable level.

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Replying to lionofludesch:
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By gillybean04
13th Feb 2024 12:26

Leap years, lion. 22.4 years I make it.

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Replying to gillybean04:
By Duggimon
13th Feb 2024 13:04

I'm not sure that makes sense, if it's every x years then x must be a whole number unless the end of the tax year moves. 22.4 years from the fifth of April is the 29th of August.

That said, I think you are right that it's every 22 or 23 years. 6/4/2047 is the same point of the 28 day cycle as 6/4/24. 6/4/23 is the same point of the 28 day cycle as 6/4/45.

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Replying to Duggimon:
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By gillybean04
13th Feb 2024 13:37

22.4 would mean (I think, starting to confuse myself) 22 most years but occasionally 23.

Just as most years have 365 days but occasionally one has 366.

On second thought, it might have been clearer if I had described it as a cycle of 22 years most of the time but occasionally a cycle of 23 years.

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Replying to gillybean04:
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By DKB-Sheffield
13th Feb 2024 13:48

I'll go with that gillybean...

I'd say 22, 22, 23, 22, 23... - but not necessarily in that order... and also not taking into account the non-leap 2100 year (I just thought about that when I started to type...and haven't reconsidered my now wrong answer!).

I'll post back in 2136 to confirm what actually happened!

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Replying to DKB-Sheffield:
RLI
By lionofludesch
13th Feb 2024 18:16

DKB-Sheffield wrote:

I'll go with that gillybean...

I'd say 22, 22, 23, 22, 23... - but not necessarily in that order... and also not taking into account the non-leap 2100 year (I just thought about that when I started to type...and haven't reconsidered my now wrong answer!).

I'll post back in 2136 to confirm what actually happened!

I reckon the cycle is indeed 4 x 28 years, which, as you say, takes it past the non leap year 2100. So the frequency will be however many of the 5 Aprils in the full 400 year cycle fall on pay day + however many of the 4 Aprils fall on payday in one of the 97 leap years.

You'll not be surprised to learn that I can't be bothered to count them - but, it may be different depending on pay day as some days are more frequent than others.

Worth a thread of its own, really .......

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Replying to gillybean04:
RLI
By lionofludesch
13th Feb 2024 14:43

gillybean04 wrote:

22.4 would mean (I think, starting to confuse myself) 22 most years but occasionally 23.

Just as most years have 365 days but occasionally one has 366.

On second thought, it might have been clearer if I had described it as a cycle of 22 years most of the time but occasionally a cycle of 23 years.

The calendar repeats every 28 years (at least, it does in our likely lifetimes). There'll be four 5 April paydays in that period plus one on 4 April in a leap year.

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Replying to lionofludesch:
RLI
By lionofludesch
13th Feb 2024 14:50

lionofludesch wrote:

The calendar repeats every 28 years (at least, it does in our likely lifetimes). There'll be four 5 April paydays in that period plus one on 4 April in a leap year.

No - that's rubbish. That's for Week 53.

Anyway - it's the year when the 14th payday is on 4th April that's the problem.

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Replying to gillybean04:
RLI
By lionofludesch
13th Feb 2024 14:34

gillybean04 wrote:

Leap years, lion. 22.4 years I make it.

You're right.

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By Duggimon
13th Feb 2024 11:47

Were I advising a client I'd write my own email and explain every time the 4 weekly pay date falls on 6 April there will be 14 pay dates in the tax year but all the allowances used to calculate payslips are split up based on there being 13, so everyone will underpay tax in that year and have to pay it back in the next year because they got given 14/13 times their tax free amounts in the year.

Both your examples seem to complicate things unnecessarily for what is a relatively straightforward thing, it's only fixing it that's complicated, but that's your job :)

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Replying to Duggimon:
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By gillybean04
13th Feb 2024 12:35

I am certain HMRC used to make a w53/54/56 info sheet available that could be given along with the employee's payslip but, having just gone searching for it and coming up empty, I'm now wondering if I just made it up.

Does anyone remember this sheet? I'd like to preserve what little sanity I have left, if possible.

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Replying to gillybean04:
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By FactChecker
13th Feb 2024 13:02

Can't help with your sanity retention (it's in short enough supply here already) ... but, no, I don't recall such a helpful sheet (even from the days when one might have expected something like it from HMRC).

It doesn't help that they often use 'Week 53' as shorthand for all multiple-of-week frequencies ... as in "If you pay your employees weekly, fortnightly or every 4 weeks, you might need to make a ‘week 53’ payment in your final FPS of the year"!

But they do claim that:
* Your payroll software will work out ‘week 53’ payments for you, if in the ‘Tax week number’ field of your FPS, you put:
‘53’ if you pay your employees weekly; or
‘54’ if you pay them fortnightly; or
‘56’ if you pay them every 4 weeks.
HMRC will send a P800 form to any employees who owe tax following a ‘week 53’ payment."

So I guess you could meld that last sentence with Duggimon's clear explanation?

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Replying to gillybean04:
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By raycad
15th Feb 2024 12:23

Responding to Gillybean04 on 1 Feb.

I vaguely remember such an Info sheet, too, but, as you say, it's not alluded to at PAYE Manual 70015, which is where you would expect to see it.

It would nevertheless be in the employer's interest to create their own explanation, if only to avoid the HR Dept being bombarded with subsequent queries re a "PAYE underpayment". The following is the explanation given with the payslips by a leading supermarket to one of my clients a few years ago:

"Your tax in the 2018/19 tax year
Our four-weekly pay periods mean we have 13 pay periods in a tax year, but occasionally there will be 14, as will be the case in 2018/19. On the 14th pay day in 2018/19 (5 April 2019), colleagues will be taxed as per the 13th pay day (8 March 2019), meaning there will be no immediate impact and colleagues do not need to take action.
This means, however, that colleagues will receive four weeks extra personal tax allowances in the tax year 2018/19 and in most cases therefore, pay less tax than they should in that tax year.
When the tax year has closed, HMRC will review how much tax each colleague has paid in 2018/19 and will make contact directly with each colleague to confirm how much they owe and agree how they will pay this back. For the majority of colleagues this will be included in your tax code as set out below.
The amounts owed will depend upon the tax code and rate of tax paid, but typically they will be in the region of:
For those paying tax at 40% or above, there may be an additional liability on the proportion of the 20% tax band applied in the 14th pay period. This additional liability could be a maximum of £530 on top of the amount listed above depending on your personal circumstances and tax code.
If you would like to understand the likely impact on you:
• This calculator will help you to estimate how much tax you will owe as a result of the extra pay period. You will need to enter information from your payslip. Please note that the calculator is not suitable for use by all colleagues, depending on your earnings and circumstances. More information can be found in the calculator file.
• You can also use the HMRC PAYE Calculator.
Colleagues will have three options in terms of re-paying the tax:
• Spread the payment over 13 pay periods as part of their pay in 2020/21 (tax code changed to make adjustment).
• In their self-assessment, if they complete one, due by 31 January 2020.
• Colleagues who do not complete a self-assessment can choose to make the payment as a one off so their tax code will not be impacted."

I agree with others that it is a complete absurdity that this situation can even arise and that workers paid four-weekly can find themselves in this situation. In strictness, even those paid weekly would also underpay tax when there was a Week 53 pay day in the tax year but I've never seen HMRC come after them for the extra tax in that situation. Possibly because the underpayment would be relatively modest. But it seems that they cannot stomach it when there are 14 four-weekly dollops.

Before I semi-retired I always used to think that I worked for nothing every 29 February! But now I think about it, that's maybe not as bad as owing a shedload of tax!

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RLI
By lionofludesch
13th Feb 2024 14:32

6 April would be next tax year of course.

4/5 April this year.

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By FactChecker
13th Feb 2024 12:00

I've no idea from where you obtained your "HMRC advise", but it's extraordinarily out-of-date and relates to instructions for calculating payroll on paper without computers (and the reference to P14 pre-dates the arrival of RTI)!

However your "Brightpay advise" is more accurate, just singularly unhelpful. Unlike Duggimon, who makes clear what is going on in terms your client should understand.

I'm tempted to point out that it's an opportunity to suggest to your client that they move to a Monthly pay cycle. Almost no-one (apart from a few large and highly-unionised companies) still pays on a 4-weekly cycle ... it's always going to cause problems somewhere when run within what is a monthly PAYE system, and has no obvious benefit to most employees who are also tied into monthly DDs and the like.

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By DKB-Sheffield
13th Feb 2024 12:10

Not to mention playing absolute havoc with UC... the one gvt benefit calculated and paid monthly! Anything other than a monthly pay cycle and some months good, some months bad!

Employers with any employees on lower incomes (which by and large includes most 'large and highly-unionised companies') really should consider the impact on those families who likely have little understanding of 4-week pay, taxes, and UC calculation criteria! They are not always in a position to budget for Month 13 when UC flatlines!

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Replying to FactChecker:
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By adam.arca
13th Feb 2024 13:12

Not always "a few large and highly-unionised companies," however.

When RTI was coming in, I told my last remaining weekly payroll a haulage company, about 20 'ees) that I was no longer able to support that and suggested they move to monthly. Completely out of left field, they came back and said their staff had voted for four weekly pay. I could never get my head around why you'd want pay at progressively earlier parts of the month which were progressively further and further away from the point where most of your DDs were likely to hit.

It was also a pain in the backside for us: I missed a trick in just saying 'no' at the very beginning. Unsurprisingly, when the owners sold up a few years later, the new owner (who was taking the payroll in house) told me they WERE going to monthly, no ifs / no buts.

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By kestrepo
13th Feb 2024 12:19

It is a known anomaly and I have had this before for week 53 payments as on a weekly payroll run. Income Tax is calculated after deducting an Employee personal allowance and by the end of week 52 the allowance should have been all used up. I would speak to your payroll software provider and follow their advice but generally you will need to change your employees tax codes to have the suffix X so that they are all processed on a week 1 month 1 basis for this payment run only. This will then apply the payroll to run on a non-cumulative basis. The RTI submissions should state that it is for week 56 and this should be enough of a prompt for HMRC send out a P800 to Employees and adjust their tax codes ongoing accordingly. You should then remove the X suffix at the start of the new tax year (as normal).

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By More unearned luck
13th Feb 2024 20:04

In what way do the two lots of advice conflict? They both say/imply that the tax for the final period is done on a non-cumulative basis. HMRC say, via the Bright pay advice, that you don't mark the code as wk1/mth1 if it wasn't already on that basis. I assume that most payroll software can cope with this instruction without manual intervention.

The rest is up to HMRC when they carry out their reconciliations and issue P800s or simple assessments to employees who don't complete an SA tax return. Employees within SA do their own reconciliation, of course. The system gives 1 1/13th lots of free-pay in the year (or negative free-pay for K coders). If only for this reason a reconciliation is required. I assume that the entry in the box '53' prompts HMRC's computer to undertake a reconciliation.

What is the problem?

"This is an anomaly within HMRC...", Brightpay are wrong to blame HMRC. It's not the taxman's fault that 365 and 366 can't be divided by 7, 14 and 28 with no remainder. HMRC didn't devise the 7 day week nor did they determine how long it takes the Earth to go around the Sun. The image Brightpay leaves me with is Blake's illustration The Ancient of Days Setting a Compass to the Earth but with an inspector of taxes rather than God holding the compass.

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By More unearned luck
13th Feb 2024 20:04

In what way do the two lots of advice conflict? They both say/imply that the tax for the final period is done on a non-cumulative basis. HMRC say, via the Bright pay advice, that you don't mark the code as wk1/mth1 if it wasn't already on that basis. I assume that most payroll software can cope with this instruction without manual intervention.

The rest is up to HMRC when they carry out their reconciliations and issue P800s or simple assessments to employees who don't complete an SA tax return. Employees within SA do their own reconciliation, of course. The system gives 1 1/13th lots of free-pay in the year (or negative free-pay for K coders). If only for this reason a reconciliation is required. I assume that the entry in the box '53' prompts HMRC's computer to undertake a reconciliation.

What is the problem?

"This is an anomaly within HMRC...", Brightpay are wrong to blame HMRC. It's not the taxman's fault that 365 and 366 can't be divided by 7, 14 and 28 with no remainder. HMRC didn't devise the 7 day week nor did they determine how long it takes the Earth to go around the Sun. The image Brightpay leaves me with is Blake's illustration The Ancient of Days Setting a Compass to the Earth but with an inspector of taxes rather than God holding the compass.

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By [email protected]
15th Feb 2024 10:30

And how many OAPs completing self assessment returns get them wrong because they multiply their 'monthly' (actually 4-weekly) pension payment by 12 instead of 13 (or 14 every twenty something ) years.

As an OAP myself, I do wish they'd pay me monthly rather than 4-weekly. As another correspondent commented, Direct Debits go out monthly, other pensions come in monthly, and budgeting is more difficult when one income stream comes in 4-weekly.

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Replying to [email protected]:
RLI
By lionofludesch
15th Feb 2024 10:42

george.gill-AT-themacds.com wrote:

And how many OAPs completing self assessment returns get them wrong because they multiply their 'monthly' (actually 4-weekly) pension payment by 12 instead of 13 (or 14 every twenty something ) years.

As an OAP myself, I do wish they'd pay me monthly rather than 4-weekly. As another correspondent commented, Direct Debits go out monthly, other pensions come in monthly, and budgeting is more difficult when one income stream comes in 4-weekly.

Personally, I see May (it's usually May) as a month where I get double pay.

You shouldn't be multiplying by 14, though. Ever.

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Pile of Stones
By Beach Accountancy
15th Feb 2024 10:50

Is it because HMRC staff still get paid in cash on a Friday via a little brown envelope with the payslip printed on the front (filled in by hand)?

Everything else they do seems to relate to the 1970s as well.

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By Rgab1947
15th Feb 2024 11:02

Ah, now I understand why HMRC gets to a different pension amount than I.

Why, oh why don't they get rid of this silly 5 April tax year-end and working on a weekly pay plan. Get modern, use a calendar year and monthly payments.

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