Contractors paid weekly, fortnightly or every four weeks and whose final payday for the 2023/24 tax year falls on Thursday the 4th of April 2024 or Friday the 5th of April 2024, may be affected by the week 53 payment.
What is a week 53 payment?
Each year, your annual tax-free allowance, which is £12,570 for the 2023/24 tax year, is split into equal amounts depending on your payment frequency. For example, if you are paid weekly, with each weekly payment, you will receive 1/52 of your tax-free allowance, as there are 52 weeks in a tax year. However, every four years, it works out that there are 53 paydays in the same tax year due to the way the weekdays fall, and this is also the case if there is a leap year.
In the tax year 2023/24, which runs from the 6th of April 2023 to the 5th of April 2024, there are 53 Thursdays and 53 Fridays. Employees paid weekly on a Thursday or Friday will receive 53 payments this year, as opposed to the usual 52. This final payment is referred to as week 53 and falls on Thursday the 4th of April 2024, and Friday the 5th of April 2024. Week 53 may also affect contractors who are paid fortnightly and every four weeks in specific years, as they may receive 27 payments instead of the usual 26 (fortnightly) or 14 payments instead of the normal 13 (every four weeks). Monthly payrolls are not affected by week 53, as there are only ever 12 pay periods.
How does a week 53 payment affect umbrella company employees?
Week 53 will affect the tax you pay because you will have already used up your tax-free allowance by week 52. As you have no more tax-free allowance left for that year, your tax will be calculated on all of your earnings for the current pay period on a Week 1, Month 1 basis and could result in a lower take-home pay than usual. If there is an overpayment of tax due to a week 53 payment, HMRC will contact you and issue a refund or change your tax code for the following year.
Alternatively, umbrella companies may allocate an extra amount of tax-free pay to week 53, meaning that your overall tax-free income for the year is higher than it should be. As the additional tax-free payment has been allocated, it must be offset by reducing the amount of tax-free pay you are allocated for the following year. HMRC will adjust your 2024/25 tax year tax code to reflect the new tax-free allocation.
What to do if you overpay or underpay tax
If you’ve overpaid or underpaid tax by the end of the tax year (the 5th of April), HMRC will send you either:
- A tax calculation letter (also known as a P800)
- A Simple Assessment letter
This will tell you how to pay the tax you owe or how to get a refund.
If you think you have overpaid tax but have not received a P800, contact HMRC by calling 0300 200 3300. You will need to know and have your tax code on hand, as they may ask you for this information. You may be due a tax rebate once your umbrella company has issued the tax year-end to HMRC.
Umbrella Company UK offers a simple and compliant way to get paid
As one of the first umbrella companies in the UK to be both FCSA accredited and SafeRec Certified – you can count on our expert team to support you through your contract work by offering a simple and compliant way to get paid.
To request a take-home pay calculation or to learn more about our umbrella service, please call our team on 01707 669023. You can also request a callback for a time that suits you, and a team member will be in touch.
