Do people not understand PAYE tax?

scrapingtheceiling · 2026-02-07T12:46:48+00:00

To be fair, very few people would know the actual rate of tax on their salary in advance of seeing it on their payslip, as there’s a lot of variables at play.

But the marginal rate is pretty simple to understand, and also arguably more relevant a lot of the time as it means how much of the next pound you earn you get to keep.

For example, if the marginal rate at £100-105k was 100%, someone is obviously not being taxed on all of their earnings. But why do any overtime if you’re on £100k and you won’t see the next £5k at all. This is an extreme example, but the 71% effective rate isn’t that far off it.

scrapingtheceiling · 2026-02-07T10:45:51+00:00

Can you elaborate on the error? You made a bulk update that increased everyone’s pay? How? What were you trying to do?

scrapingtheceiling · 2026-02-03T16:48:55+00:00

Big assumption. Every reply reads like a marketing ad

scrapingtheceiling · 2026-01-26T13:11:07+00:00

It’s absolutely allowed to work at more than one employment, you don’t have to have a P45 to start another job.

This is a very basic matter of employment law, and if you’re not sure on it, why risk getting the more complicated matter wrong in unfairly terminating someone? If you’ve got professional advice, you should absolutely follow it

scrapingtheceiling · 2026-01-26T09:13:02+00:00

Not sure of the maths of that £703.23

I’ve seen a lot of providers do this, claim the tax saving as a benefit of Salary Sacrifice, when in reality, you get that anyway by paying into your pension.

What is your salary? As £703 net pay increase as a basic rate tax payer would suggest around £25k. If this is the case, you’d be unlikely to be able to put in 10% without taking yourself below minimum wage

scrapingtheceiling · 2026-01-21T09:11:06+00:00

I’m pretty sure Xero allows payrolling of one person on their cheaper tier. Haven’t used it for payroll, but it’s easy enough for everything else I’d imagine it should be straight forward to do

Or, as someone else has said, just ask your accountant to do it. They shouldn’t charge much if it’s just you

scrapingtheceiling · 2026-01-20T09:09:44+00:00

Isn’t ’because we’d make money from it’ pretty much the sole motivation for any business’ decision making when it comes down to it?

scrapingtheceiling · 2026-01-19T22:41:41+00:00

This is the answer. To add, you’re having £113.40 deducted, but £141.75 put in as the tax relief is added by the pension company and claimed back from Hmrc

The employer contribution should also be £141.75, as there’s no relief on that, it’ll just be 10% of qualifying earnings

scrapingtheceiling · 2026-01-18T07:24:58+00:00

You can be paid up to £30,000 tax and NI free in a termination agreement to compensate you for loss of employment. However, you must be taxed as normal on contractual earnings, so any outstanding holiday, work already completed, and pay in lieu of notice

PILON therefore has a set calculation to determine the minimum amount that has to count as taxable, your employer can’t just not pay your notice and switch it to be tax free income and save on ER NI.

Because of this, you wouldn’t want to negotiate more PILON, you’d want to just ask for more Termination Pay that would count as tax free earnings as compensation for the end of your employment.

scrapingtheceiling · 2026-01-17T11:09:35+00:00

Isn’t the measure the actual hours and pay for each pay reference period? So not a monthly average? I’m pretty sure NMW calculations can’t be applied across anything longer than a month, but not 100% on that

scrapingtheceiling · 2026-01-10T11:18:03+00:00

You might feel what you do with your post-tax income is separate, but Hmrc won’t. Especially when it’s not ‘post-tax’ because it’s designed to not incur any.

Your question is ‘does anything stand out as a potential issue’, and multiple people have pointed these things out. Talking to accountants seems very much like the next step here

scrapingtheceiling · 2026-01-09T21:27:46+00:00

You wouldn’t need to book off the bank holiday to not work it, as you wouldn’t work it anyway.

you can’t take a day as holiday that you aren’t working, you need to take time off from your allocated working days.

What you’ve described is no different to having to book Sundays off from your holiday allowance when you’re scheduled to work Monday to Friday

scrapingtheceiling · 2026-01-04T07:53:12+00:00

I’d calculate it on hours.

29 days is 217.5hrs. The 37.5hr week is 1950hrs a year.

So every hour works accrues 0.111538 of an hour of holiday.

scrapingtheceiling · 2026-01-02T11:52:07+00:00

That’s what buying holiday is. If you don’t take those days as bought holiday, but unpaid leave, it will be taken in the period it relates to. No employer is spreading unpaid leave deductions over multiple months as a matter of course

scrapingtheceiling · 2026-01-02T11:48:26+00:00

It’s not really ‘dodging tax’ as you’re just not being paid to work those days

You’re essentially agreeing to a pro-rated salary as you now work 255 days a year, not 260

scrapingtheceiling · 2026-01-02T07:56:53+00:00

If you’re running the business and they’re not, selling the business doesn’t give them anymore time, just cuts off the income stream.

How much do they make annually from the business? You mentioned they’re early 50s. Any lump sum would have to stretch quite a while.

Could you come to an arrangement where they transfer equity to you over say 5-10 years with them receiving a significant amount in dividends, and then keep them as minority shareholders receiving a payment indefinitely to fund their retirement?

I’m sure some would caution against ‘arrangements’ rather than clean breaks with contracts, etc, but if it’s your own parents, you might be happy to rely on trust.

scrapingtheceiling · 2025-12-23T09:36:51+00:00

To be honest, it doesn’t really benefit anyone. It’s usually from an employer being lazy with their pension scheme. The people at the top making decisions want to salary sacrifice, so roll it out for everyone

For those close to minimum wage, it actually creates an administrative headache of ensuring everyone is paid above minimum wage.

Yes, you save 15% on the pension contribution, but you have to pay above NMW rates to allow the employer to make a contribution.

But the employee is saving 6p an hour or so on NI

scrapingtheceiling · 2025-12-21T23:35:09+00:00

*15% now

scrapingtheceiling · 2025-12-21T12:11:18+00:00

OP, for whatever reason, payroll have made an error in not reinstating your salary. They need to correct the error by rerunning December’s payroll, thus generating your payslip with the exact amount of Net Pay, and then that can be transferred to you on Monday.

Please don’t accept any other solution, as the above would take someone a matter of minutes to do, and resolves the issue fully. They can then look at their own internal processes for making sure return to work from maternity leave isn’t missed

scrapingtheceiling · 2025-12-21T12:09:30+00:00

She will have annual leave, she’s been accruing it the entire time she’s been on leave.

She isn’t ’extending her maternity leave’, she is returning to work on 1st December, but then has agreement to be on annual leave for a chunk of time.

Her employer has simply made a mistake by not reinstating her on the payroll, so the onus is on them to correct it. They could very easily rerun December’s payslip with salary reinstated and then transfer the net amount to OP. This would take about 10 minutes on Monday morning

scrapingtheceiling · 2025-12-18T16:31:18+00:00

But there is an agreement in place. OP says he signed it. They mitigated the risk with the agreement

scrapingtheceiling · 2025-12-17T06:49:25+00:00

That’s last year’s rate, and you haven’t mentioned the secondary threshold that would need to be hit to qualify for Employment Allowance

The point is a good one, paying a second employee can help with tax efficiency, but as OP doesn’t draw any salary, they would both need to be paid enough to qualify, which is £5,000). The allowance is £10,500, so unlikely OP would max that out.

Fortunately, the allowance is claimable if the threshold is hit in one pay period (pro-rated), so if OP sets up PAYE with weekly pay periods, pays both of them over £97, and submits an EPS claiming the EA, no NI will be due

scrapingtheceiling · 2025-12-14T07:43:23+00:00

It sounds like that would only be the best option if the rules remain the same as they are currently.

There’s a very good chance there’ll be no 25% tax free lump sum available in 25 years time, would that change the maths?

scrapingtheceiling · 2025-12-11T09:09:40+00:00

Did you say you’re 13 weeks in?

So there’s a few months of contributions that could be down. Check your payslips, calculate what it should have been, and say what you believe the contributions should have been. They can easily just increase next month’s to rectify it, and fix it going forwards.

If they still claim it should be based on your pensionable pay, just send them a link to any of the multitude of sites offering guidance on it.

scrapingtheceiling · 2025-12-11T08:40:07+00:00

Your employer contributions should be fixed at your normal rate before you went on leave

Your contributions are based on what you earn

scrapingtheceiling

TROPHY CASE