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My employer overpaid me by a significant percentage of my salary and so I need to repay the money.

Obviously I don't want to lose out on the income tax allowance for this tax year. How can I make sure this doesn't happen? I'm taxed at source and don't make a self assessment.

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You should ask your employer to issue an updated payslip showing the correct gross salary, deductions and net salary, and then repay to the employer the difference between the net salary in your old (wrong) pay slip and the new (correct) one.

You should also get them to confirm that they have corrected any information they sent HMRC. At the end of the tax year, when you get a P60 showing your salary for the year, make sure that it is consistent with the corrected salary amount, and check that the tax it shows as being deducted is also correct for that gross salary for the year.

If you are still employed by them then you could just ask them to withhold the overpayment in your next salary payment, at which point the income tax would sort itself out because PAYE is calculated based on cumulative totals. If the overpayment had happened at the end of the tax year (March) then there'd be some risk of it messing up your tax payments.

In some cases it's also possible that withholding from the next salary payment could make a difference to the total national insurance you end up paying - broadly, if you earn below the "Primary Threshold" of £8164/year, you might lose out. If you earn close to the "Upper Earnings Limit" of £45000/year, you could end up gaining.

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