Holiday Pay taxation?

driverdj2000

Hi all,
I;ve been searching for a concrete answer online but am still unsure.
I am due to leave my job in a few weeks. The thing is I have a full years outstanding annual leave (4 weeks or so) which I didn't take. My employer says that when I leave I will receive my final weeks pay as well as All my outstanding holiday pay.

My query is about how this will be taxed. Will it be taxed as four weeks pay meaning I wont lose out or will it be taxed as a large payment, hence I will pay a lot more tax than if I was paid it week by week,
Also if it was taxed heavily is there a way of claiming it back?

Thanks in advance!!

Daxve

If it's all paid in one go as a lump sum it will all be taxed together in that weeks pay so yes you will pay quite a lot of tax on it.

If your starting a new job it should balance itself out over the rest of the year. It all depends really on what rate you normally pay tax and if you normally use all your credits and rate band in a given week. If you pay tax at 20% normally you should notice you pay slightly less tax than normal for the rest of year therefore you will get whatever refund you are due spread over the rest of the year. If you normally pay tax at 41% then you probably get very little or nothing back as you've already used up your standard rate band.

If you are unemployed or leaving the country you can apply after 4 weeks have passed on a form P50 to have some of the tax refunded but not all in one go - you will get the credit for the 4 weeks unused credits and rate band since you became unemployed. You can apply every 4 weeks until you start work again. If you are permanently leaving the country you could be entitled to split year treatment and will get any refund due in one go.

allthedoyles

You are entitled to a weekly tax credit for every week you are on holidays .

However , this will increase your date of leaving on P45 to the end of your holidays , which will also increase your entitlement to JSB.

driverdj2000

Thanks Guys,
Im due to start a new job in june. I just want to make sure ill have enough money to keep me going until then.
Im on the 20% tax rate so I should get the extra tax I will have to pay back eventually.

barneystinson

allthedoyles wrote: »

You are entitled to a weekly tax credit for every week you are on holidays .

However , this will increase your date of leaving on P45 to the end of your holidays , which will also increase your entitlement to JSB.

That would be the case if the OP was actually taking his holidays, but he's not, he's simply being paid for holidays that weren't taken. The date of leaving is the date of leaving.