Quick payment question

[tommers]

So work owe me some money for the last couple of months of work. I also owe them a loan. When they've paid me they have taken my salary and calculated tax and everything and then deducted the loan afterwards.

In my head they should have deducted the loan from the main amount and then taxed the rest. Otherwise I'm paying tax on something I owe, rather than something I'm being paid.

Does that make sense? TBH I'm at the stage now where numbers are flying round the screen.

 

[farmerbarleymow]

Might depend on the type of loan. When I had a season ticket loan it was classed as a benefit in kind so my tax code changed - the repayments used to appear on the deductions bit of my payslip but I have no idea if I was also taxed on it. Sasaferrato might be able to advise.

 

[Puddy_Tat]

umm

without knowing the circumstances of the loan, but i'd have thought you'd pay back the loan out of your net pay (after tax) - or did you pay income tax and all the rest of it on the loan in the first place?

 

[quimcunx]

If you borrowed the money from me, rather than your employer, you would pay it back to me after tax.

 

[tommers]

yeah, this is all true and makes sense I guess. Annoyingly the loan was to pay some tax.

 

[Hollis]

No - they're right.

You pay tax on what you earn, not what you're paid. Having a loan doesn't make any difference.

 

[scifisam]

Was it a loan or an advance against salary?

 

[tommers]

Was it a loan or an advance against salary?

It was a loan.

 

[Monkeygrinder's Organ]

Yeah what the others have said I'm afraid. Unless it is something specifically exempted like the cycle to work scheme or similar they're doing it right, it would basically be (not very well hidden) tax evasion to do it the other way round.

 

[Elpenor]

was the loan less than £10,000?

If so this link has some detail should this be keeping you awake tonight

Print Expenses and benefits: loans provided to employees: Overview - GOV.UK

Tax and reporting rules for employers providing loans to employees

www.gov.uk

This is a net deduction and the loan balance will not reduce taxable pay

So if for example work owe you £6k for the last few months pay, and you also have a £2k loan to repay then you unfortunately still pay tax on £6k

There are some specific rules about national minimum wage and loan deductions but I think this refers mainly to repaying training costs which sounds like it isn’t relevant.

 

[InArduisFouette]

unless it was set up as salray sacrifice and something that HMRC allows to be done by Salary Sacrifice it will be taken from your net pay

 

[InArduisFouette]

No - they're right.

You pay tax on what you earn, not what you're paid. Having a loan doesn't make any difference.

aparent from where there are specific things which are permitted for 'salary sacrifice' where the tax and more pertinently NI treatment is more favourable