Payroll
What Is Back Pay? Your Rights and How It Is Taxed
Back pay is money an employer owes for work already done, such as an underpayment, a backdated pay rise or unpaid overtime.
Last reviewed 10 November 2026 · Written by the Right Choice Consulting team
When does back pay arise?
- A pay rise agreed and applied from an earlier date.
- Underpayment due to a payroll error.
- Unpaid overtime or holiday pay.
- Arrears of the National Minimum Wage or National Living Wage.
How back pay is paid and taxed
Back pay is treated as earnings and goes through payroll with tax and National Insurance deducted. It is normally taxed when it is paid, not when it was earned, so a large lump sum can push that month’s pay into a higher tax band, although this often evens out over the tax year under a normal cumulative tax code.
| Point | Detail |
|---|---|
| Deductions | Income Tax, NI and pension contributions as normal |
| Payslip | Should show back pay clearly |
| Pension | Contributions may apply to the extra pay |
If you are owed back pay
- Check payslips and your contract.
- Raise it in writing with your employer.
- Contact Acas for guidance if not resolved.
- For minimum wage arrears, you can report to HMRC.
Time limits apply to claims, so act promptly.
For employers
Correct underpayments promptly, record the reason, and use payroll software to calculate back pay across periods accurately.
Sources
This article is general information based on UK rules as understood at the review date above. It is not personal tax or legal advice. Rates, thresholds and rules change; confirm the position for your situation with an accountant or on GOV.UK.