Why does your 2nd Payment in a New Tax Year often look different?

One annual event that we’d like to get ahead of is the 2nd payroll cycle of the new tax year. It’s common for your 2nd pay slip of the financial year to look a little different when compared to previous, but why?

Well, it’s because of the way your payroll is set up if you work via a recruitment agency (which is the vast majority of our contractors). When your pay is processed via a recruitment agency on its journey to us there is a delay, so you’re paid in

arrears (a week or a month depending on your pay frequency). Because of this delay you’ll experience a slight overlap between tax years that also affects NIC allowances – it’s a little complex, but here goes:

On week one of the new tax year you’ll receive payment for week 52 of the previous, but all NIC allowance for the previous tax year will be used up, so you’ll pay the new tax year rates – essentially using up your week 1 NIC allowances for week 52’s pay cycle. In week 2 of the new tax year you’ll be paid for week 1’s work – but you’ve already used week 1’s NIC allowance so the system will automatically kick in elevated rates of NI that will be increased as you’ve gone above allowance. In week 3, you’ll be paid for week 2’s work, your week 2 allowance is now available and so you’ll be back to paying normal rates. Confusing, we know, perhaps the table below will help give you a visual:

Still confused? Don’t worry, when you get to your 2nd pay cycle of the new tax year, if you have any concerns or questions please simply give us a call, we’re here to help and our team will gladly provide clarity where needed.

There are other important changes that may affect your pay in the new tax year, find out more about Increases to National Minimum Wage or how National Insurance Contribution increases may affect you.