The Tax Impact of a Delayed Lump Sum Payment
If your 2026/27 pay rise is delayed and paid as arrears, you need to understand the tax implications.
When you receive several months of backdated pay in a single month, PAYE (Pay As You Earn) processes the entire amount as if it were your income for that single month. This can:
Push you into a higher tax bracket temporarily: If your normal monthly gross is £2,200 and you receive £2,200 plus £400 in arrears in one month (total £2,600), HMRC calculates the tax on £2,600 multiplied by 12 (as if your annual income were £31,200 rather than your actual figure). This can result in excess tax being withheld.
Reduce Universal Credit: If you receive Universal Credit, any month in which your take-home pay is significantly higher than normal may result in UC being reduced or stopped entirely for that assessment period — even if the extra money is a one-off arrears payment, not a permanent increase.
Interaction with student loan repayments: A large arrears payment in one month may trigger higher student loan deductions for that month.
If you receive a delayed lump sum, HMRC should reconcile any over-deducted tax through your end-of-year tax calculation or through your next tax code adjustment. However, if you believe you have been overtaxed on an arrears payment, you can contact HMRC directly to request a review.
Use the NHS Back Pay Calculator on this site to estimate the expected value of your arrears if a delay occurs.