Created on: 23 Mar 2023 | Last modified: 11 May 2023
Under UK tax law, income from employment is taxable at the date on which an employee becomes legally entitled to the payment.
With respect to backpay due under the terms of the recent pay settlement for teachers in Scotland, employees became legally entitled to the applicable amount on 14 March 2022, which was the date on which SNCT Circular 23/93 was issued to employers.
The EIS has put the maximum possible pressure on Local Authorities to have the 2022/23 pay increase and all applicable back pay processed in their March 2023 payroll. Whilst a number have been able to do this, many have not.
Where Local Authorities are unable to process back-pay within the tax year ending 5 April 2023, the amounts payable will be taxed under PAYE in the tax year 2023/24.
For many teachers, this treatment will result in them having to pay more tax than would have been payable had their backpay processed within the 2022/23 tax year. The precise amount payable will depend on the individual member’s point on the pay scale and their tax code.
However, for a teacher at Point 5 on the main grade scale with a standard tax code, the additional tax payable has been calculated at approximately £382 (on the basis that the higher rate of tax is only applicable earnings above £43,663).
Those below Point 3 on the main grade scale are unlikely to be affected as their top rate of tax will probably be 21% in both years, regardless of into which year the applicable back pay falls.
Similarly, those above Point 3 on the Chartered Teacher scale, Point 2 on the Principal Teacher Scale or on the Lead Teacher Scale are unlikely to be significantly affected as their top rate of tax will probably be 41%/ 42% in both years, regardless of into which year the applicable back pay falls.
Tax overpaid due to back-pay being processed in an incorrect year can be reclaimed from HMRC. However, there is no route to doing so prior to the end of the 2023/24 tax year and the receipt of your P60 pay summary for that year.
If you are required to prepare a Self-Assessment Tax Return, then you will be able to include the necessary adjustments on your return for the tax year 2023/24.
However, we recognise that the vast majority of members will not be required to submit a tax return.
If you are not required to complete a tax return, you will require to submit a claim to HMRC.
In order to make a claim online (which is HMRC’s preferred approach) you will be required to have (or set up) a Government Gateway login and a Personal Tax Account.
There are also options to log claims by telephone or post, which are also described on the HMRC web page. (HMRC advises that telephone calls can involve very long waits, and response times for postal correspondence can be quite protracted.)
For information we have provided some worked examples.
These examples show how the adverse figures are arrived at for teachers at Main Grade Point 5 and Principal Teachers at their scale Point 1.
Other examples show why anyone above principal teacher Point 3 or below Main Grade Point 3 will not be affected one way or the other.
There are a number of other potential variables: