Income Tax

[HappyFace]

My wife is currently on a 5 year career break. To ensure her job is kept 'open' she has to work for two weeks in each of the 5 years.  She was on about �30K. Can she assume her salary for these two weeks will be free of income tax and NI? Or, will she be taxed and then the Inland Revenue will realise in April next year and refund her? Thanks

[kags]

As long as she doesn't have any other earned income, then when she works her employer will tax her for the 2 weeks then give her a P45. If she writes to the Inland Revenue straight away and tells them she will not be working again in the tax year, they will usually refund the tax.  They could insist on waiting for the end of the tax year and the completion of a Return, but in my experience, as long as her tax affairs are otherwise straightforward (no income from property, investments etc), they will make the refund straight away.

She will be liable to National Insurance contributions for the 2 weeks, and these are not refundable.

[kags]

Alternatively, I suppose it is possible that the company will keep your wife on the payroll the whole time, and not issue P45s. This would mean she had a normal tax code, and wouldn't pay any tax on the earnings because of her accumulated freepay (she would still pay NI). I am not sure of the legality of this without some research though, and I think it is unlikely.

[SpiceMan]

Surely, if her job is being kept open, this means she is still employed and would not be liable for tax for those two weeks. 

[Didwot]

�30,000 pa is about �576 per week.
In the two weeks your wife will earn a total of about �1152.00
The earnings threshold above which you pay NHI is currently �94 per week or �408 month, and once you earn more than the earnings threshold in the pay week or pay month you have to pay NHI at 11% on the whole of the excess (subject to an upper earnings level) and never get it back.
If your wife is paid weekly and is paid in two separate pay weeks she will pay �106.14 NHI. If she is paid monthly, and receives the pay in just one pay month then she will pay �82.06, and if the pay spreads over two months she will pay �37.40.
It is best if she works and is paid one day per month for any 10 months, as she would then only pay �2.36 if weekly paid or nothing if monthly paid.
Tax is calculated annually, but for the purpose of PAYE your annual tax free allownace is divided by 52 for weekly paid employees or 12 for monthly paid. The allowances are added to one another each pay period so the eventual annual allowance is reached at the end of the year. The annual allowance is �4899 so your wife would have to wait to month three (or week 13) before her allowance exceeded her income. If she received all of her pay before that period she would pay tax, and then get it back. If her income was paid after that time, or was spread at less than �94.21 per tax week (weekly paid) or �408.25 per month (monthly paid) then she will never part with the tax at all - assuming she has no other income.
Crazy isn't it.