PAYE – Week 53 payments
Employers and employees that are paid weekly, bi-weekly or four weekly and whose final payday of the 2013-14 tax year falls on 5 April 2014 are reminded that there is a possibility that they may underpay tax for the current tax year. This can happen where a ‘week 53 payment’ is received.
As the calendar year is made up of 52 weeks and 1 day (or 2 days in a leap year), it is possible for an extra payday to occur for employees that are paid weekly (week 53), two-weekly (week 54) or four-weekly (week 56), and their last payday in the tax year falls on 5 April (4th or 5th April in a leap year). This anomaly doesn’t apply to employees that are paid monthly.
These payments can result in an underpayment of tax as the employee in effect receives extra personal allowances above the amount they were entitled to. The amount of extra ‘tax free pay’ can be as high as 4/52 of the personal allowance for employees that are paid every four weeks. Commercial payroll software and HMRC’s Basic PAYE Tools automatically calculate ‘week 53’ payments.
If the payments have not been calculated correctly employees may receive a letter from HMRC together with a form P800 Tax Calculation explaining how any underpayment of tax will be collected.