Redundancy pay

atypical_boro

atypical_boro

Well-known member
Is there a useful calculator out there, to work out how much I'll be taxed if I take it? (I know how much I'll be getting before tax).

All the ones on google appear to be focused on statutory redundancy pay, which I'm guessing you don't get if your organisation has enhanced redundancy package (?), and how much pay I'll be entitled to (which I already know).

Or alternatively, does anyone have a pre-prepared spreadsheet template they could send me? 😁
 
atypical_boro said:
Is there a useful calculator out there, to work out how much I'll be taxed if I take it? (I know how much I'll be getting before tax).

All the ones on google appear to be focused on statutory redundancy pay, which I'm guessing you don't get if your organisation has enhanced redundancy package (?), and how much pay I'll be entitled to (which I already know).

Or alternatively, does anyone have a pre-prepared spreadsheet template they could send me? 😁
Click to expand...
There is no easy answer because it depends what's in the redundancy package. The first 30k is tax free.
See
www.gov.uk

Tax on termination payments

Check if you’ll pay tax or National Insurance on the 'termination payment' you may get when leaving a job.
www.gov.uk www.gov.uk
 
i think it goes on your terms and conditions? when/if I get mine, the 1st 30k is tax free
 
As above. First 30k is tax free. Anything above that is subject to your usual tax. If you're into the 40% tax bracket with your earnings YTD, then it'll be taxed at 40% I believe.

I have just been through redundancy after 25 years in a job and what I was given, to what I actually received was very different.

HMRC took a huge bite! 😭

Only way to really know, is ask an accountant. Who should have a good idea of the end figure.
 
If you are talking about redundancy and not including any pay in lieu of notice, then i would take off the £30,000 from the total amount and what you have left will be taxed at your normal rate, however depending on your earnings to date during the year it could take you into a higher tax bracket.
 
Looks like you need to know what the gross figure is made up of. Surely only your employer can tell you that.
Some good examples in Millbrooks link in Tax on Termination Payments
 
1finny said:
The way to do it is (I think…. It’s what I did)
Take your gross and deduct the £30k
Put the remainder into a tax calculator including any other earnings you have had in the tax year.

Hope this is good news for you (not my advice - the redundancy)
Click to expand...
Exactly what i did few years back and was close to what I received
 
Redundancy is essentially compensation for the role not being there anymore as opposed to it being earnings. The first £30k aside it will not be taxed and neither will it be considered earnings for the purposes of determining whether a tax threshold has been exceeded.
 
Your notice is taxable. Your redundancy pay to a limit isn't. Iirc from my last time playing this game.
 
Just been through this myself and assuming you have something above 30k it will be taxed in essence . Tax is complicated as it depends on what your ask is , for example if you get 100k in simple terms as a redundancy , and no additional pension , the first 30k will be tax free and it’s highly likely your payroll department will then take the 70k and pro rate that for 12 months so getting a much higher number and apply the tax rate on that .

So your in month take home might look quite different to what it should be and you will need to compete a tax return to get the rest back in essence .

Don’t forget to max your pension if you can afford to and if the company allows .

I had to keep a pretty detailed spreadsheet and reconciliation to ensure I could understand what my payroll had done and what I expect to have to claim back .

Sorry for. It being super clear but unfortunately it’s not super clear
 
Boro.Fur said:
Redundancy is essentially compensation for the role not being there anymore as opposed to it being earnings. The first £30k aside it will not be taxed and neither will it be considered earnings for the purposes of determining whether a tax threshold has been exceeded.
Click to expand...
OH no.
 
atypical_boro said:
Is there a useful calculator out there, to work out how much I'll be taxed if I take it? (I know how much I'll be getting before tax).

All the ones on google appear to be focused on statutory redundancy pay, which I'm guessing you don't get if your organisation has enhanced redundancy package (?), and how much pay I'll be entitled to (which I already know).

Or alternatively, does anyone have a pre-prepared spreadsheet template they could send me? 😁
Click to expand...

Are you getting more than £30k anything more than £30k will be taxed at what is referred to as your "marginal rate". The first £30k is a tax free allowance.

To work out your marginal rate you need to know what you will earn in the whole tax year 6 april 24 to 5 april 25 before the redundancy pay ( so obviously depend on whether you are then going to work elsewhere after the redundancy)
So if those 24-25 earning are under £50k then you get some tax at 20% but then potentially some at 40% as the redundancy money in excess of £30k acts as your top slice of income. see below table.

1730895416919.png

However is slightly more complicated than that simple table if your total pot goes over £100k as you lose £1 of the 12570 0% band/ personnel allowance for every £2 earned over £100k, so effectively anything in between £100K and £125140 is taxed at 60%

Also, any pay in lieu of notice and pay for holidays owed cant be included in your £30k tax free part, it just gets taxed as normal pay.*
* sometimes you can waive your right to pay in lieu of notice and if that was going to be worth say £2k and your redundancy was £20k, you could get your employer to enhance the redundancy to £22k and you waive the PILON. Clearly this is only worth doing if the normal redundancy is under £30k.

So if for example you reckon you will earn £40k this tax year 24-25 as a combo of to date pay plus future jobs, and your redundancy settlement is £35k plus £2k pay in lieu of notice/holidays (£37k in total)

£30k you pay no tax.
£7k (the remaining £5k from redunc and the £2k pilon) will be taxed at your marginal rate of 20%.

but if your 24-25 earnings will be £60k, that £7k will be taxed at 40%

and if you are lucky/ unlucky enough to have 24-25 earnings of £110k then the £7k will be taxed at 60%

hope that helps
 
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