Typically, although a year of calendar days doesn’t split equally into 52 weeks, for PAYE purposes employers who pay weekly will be accustomed to paying 52 times in a tax year between each 6 to 5 April. Each pay date will fall into a separate tax week, for a total of 52 tax weeks by the end of the tax year. A similar process will be familiar for those who pay fortnightly, with 26 payments within a tax year or for those who pay four-weekly with 13 payments within the tax year.

Depending on how weekdays fall in a year, in some years an employer may have to account for an extra tax ‘week’ within the same tax year, because one or two days are remaining after tax week 52 has completed. If your normal pay day falls on one of these days, an extra tax week is required. 

This isn’t anything new but is more prevalent this year because the additional days fall on Thursday and Friday – the most common pay days for employees paying weekly, fortnightly, or four-weekly. In the 2023/2024 tax year this will impact employees of these pay frequencies who are due to be paid on Thursday 4 or Friday 5 April 2024.

Despite including only two days, for tax purposes these days are treated as a whole tax week. For each pay frequency, these additional tax weeks are known as:

• Weekly: Week 53, for the 53rd payment of the tax year
• Fortnightly: Week 54, for the 27th payment of the tax year
• Four-weekly: Week 56, for the 14th payment of the tax year

What does this mean for employees?

National insurance is calculated as normal and is not impacted by the additional week, because the calculation method behind National Insurance only considers earnings included each time an employee is paid, regardless of what has happened in earlier payments. Tax, however, is affected because there are elements of the cumulative year to date position of tax free allowance, earnings paid and tax deducted considered in its calculation. 

Because the tax-free allowance allocated to employees through their tax code is split into 52 weeks, most employees will have already used their tax-free allowance before the payment due in the additional tax week. 

To help protect employees’ pay from being much less than normal, HMRC instructs an extra amount of tax-free allowance to be applied to the additional tax week, based on one week, one fortnight, or one four-week portion of the employees’ tax-free allowance. The tax calculation for all employees in this additional period is slightly different too – any previous pay received and tax paid are ignored, and the tax calculation is performed solely on the taxable income for the period.

As a payroll client of Johnston Carmichael, we will ensure you are fully compliant with the additional measures required. Our specialist Payroll Services team, supported by HMRC recognised payroll software and our robust procedures, will ensure this is taken care of on your behalf.

This approach can mean employees pay the wrong amount of tax in this final payment, but this is unavoidable because payroll must comply with the method set out by HMRC. Should this happen, HMRC will issue a P800 notice to the employee directly, indicating if an over or underpayment has occurred and how this will be rectified. Employees can contact the employee HMRC tax helpline on 0300 200 3300 to discuss any concerns regarding potential incorrect tax. We encourage all employees to register with HMRC for an online personal tax account where they will be able to check the information HMRC hold about their own income and tax.

We understand that this situation is affecting many employers throughout the UK. Unfortunately, this is unavoidable and is not due to any mistake on your part or that of your payroll provider. As you know, it is the taxpayer's responsibility to pay Income Tax, and your employees may soon receive a tax underpayment notice from HM Revenue & Customs, which will inform them that their tax code will be adjusted to recover the underpaid tax. This is a normal procedure.