Redundancy pay

atypical_boro said:
thanks for responses.

Maybe I need to speak to an accountant though. 😁
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you should not do. let me give you the simplisteic view. Your employer set you up at the start of the year as if you were staying the whole year and therefore they worked out your 20% tax threshold for a MONTH of pay and also if necessary your 40% threshold for a MONTH of pay. I have been through this too , but not since 2007 but the rules have not changed that much. Your entire redundancy minus 30k is coming in 1 MONTH of pay so you obv likely to be most above the top threshold. So they will have to apply that tax rate for that month (40%) ( basically any GROSS earnings in that month above the gross threshold allowance level of 4,190) They can't do anything about that as they have no knowledge of what you might earn in the remaining months of the tax year.
If you get an immediate job at the same sort of salary then things will even out but in my case I ws sacked off end of Oct and didn't work the rest of the tax year so I was able to reclaim the overpaid tax about 6 months after that year ended.
 
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Boro_Interlinked said:
you should not do. let me give you the simplisteic view. Your employer set you up at the start of the year as if you were staying the whole year and therefore they worked out your 20% tax threshold for a MONTH of pay and also if necessary your 40% threshold for a MONTH of pay. I have been through this too , but not since 2007 but the rules have not changed that much. Your entire redundancy minus 30k is coming in 1 MONTH of pay so you obv likely to be most above the top threshold. So they will have to apply that tax rate for that month (40%) ( basically any GROSS earnings in that month above the gross threshold allowance level of 4,190) They can't do anything about that as they have no knowledge of what you might earn in the remaining months of the tax year.
If you get an immediate job at the same sort of salary then things will even out but in my case I ws sacked off end of Oct and didn't work the rest of the tax year so I was able to reclaim the overpaid tax about 6 months after that year ended.
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OK thanks. So I got a new job straight away on same money its not so complicated?

I still need to work out the actual NET take home lump sum I'll get, but I'll use Finny's method above.
 
atypical_boro said:
OK thanks. So I got a new job straight away on same money its not so complicated?

I still need to work out the actual NET take home lump sum I'll get, but I'll use Finny's method above.
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I’m sure you have this covered ….
To get your full year tax position you need to add on you gross salary for the remainder of the year from your new employer
 
atypical_boro said:
OK thanks. So I got a new job straight away on same money its not so complicated?

I still need to work out the actual NET take home lump sum I'll get, but I'll use Finny's method above.
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yes there are two slightly different amounts though (because your personal allowances / tax bands for PAYE are given to you in 12 monthly amounts and Tax is calculated on a cumulative basis.

A) how much more net pay will you get in the month your redundancy etc is paid out (and it might well be mixed up with regular monthly salary)
B) what is the overall effect on your total Net pay in the tax year 24/25
 
atypical_boro said:
Would that mean no need to pay any tax (yet)?

God I'm too young for this stuff.
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Yeah, they will tax you at your current tax code for redundancy and notice period (unless it tips you into a higher tax bracket).
Then, at the end of the year you may have an under payment if your new pay pushes you into a higher tax code.

Good advice from Uwe and others - put a chunk in your pension as a one off payment.
You will get 40% of that back as cash or offset against any extra taxpayer when you do your end of year.

PM me if you need any more help
 
1finny said:
Yeah, they will tax you at your current tax code for redundancy and notice period (unless it tips you into a higher tax bracket).
Then, at the end of the year you may have an under payment if your new pay pushes you into a higher tax code.

Good advice from Uwe and others - put a chunk in your pension as a one off payment.
You will get 40% of that back as cash or offset against any extra taxpayer when you do your end of year.

PM me if you need any more help
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cheers, might take you up on that!
 
Just doing similar calculations for the 5th time. I have some pay in lieu of notice, plus some ex gratia bits added on. Getting a bit sick of the whole redundancy thing to be honest - in my 20s and 30s I didn't lose any sleep over it but now, in my 50s I am starting to really worry when it happens.
 
Some good stuff here and pretty consistent . If you are worried about your take home for the redundancy month , it’s really important to remember it might be lower than you are expecting for reasons some like Boro_interlinked have said . I was quite a lot down in the month I got paid and asi was hoping to not work for the rest of the year will have to wait to do a tax return to get it corrected .

The pension overpayment is something defo to consider as you’re getting additional money for nothing subject to the 60k limit (more if underpaid in previous 3 years)

That bit me on the bum but that’s another story
 
A few years go a mate of mine got redundancy after 20-odd years and arranged for his employers to keep paying him it as his normal weekly wage until it ran out and he was just taxed at his normal rate, rather than the much higher rate of the redundancy pay on top of what he had already earned. That was his way of not paying the higher tax rate and his company was happy to do it for some reason.
He then just did cash/under the table jobs until he stopped getting paid by his 'old' company then got another tax-paying job with one of the competitors of his former company.
Not sure that helps at all, but interesting way to try to beat the taxman (And you're working for no one but me)
 
Uwefuchs said:
I believe anything above 30k you should be able to put into your company pension if you have one.
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1finny said:
Good advice from Uwe and others - put a chunk in your pension as a one off payment.
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Johnnyweetabix said:
The pension overpayment is something defo to consider as you’re getting additional money for nothing subject to the 60k limit (more if underpaid in previous 3 years)
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Pfft who’d of thought we had a board full of tax dodging tories 🤣
 
bungydinsdale said:
A few years go a mate of mine got redundancy after 20-odd years and arranged for his employers to keep paying him it as his normal weekly wage until it ran out and he was just taxed at his normal rate, rather than the much higher rate of the redundancy pay on top of what he had already earned. That was his way of not paying the higher tax rate and his company was happy to do it for some reason.
He then just did cash/under the table jobs until he stopped getting paid by his 'old' company then got another tax-paying job with one of the competitors of his former company.
Not sure that helps at all, but interesting way to try to beat the taxman (And you're working for no one but me)
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That was fundamentally stupid as
1) he appears to have lost his "up to £30k tax free" part by them doing that, being taxed at 20% instead.
2) even is he had paid some higher rate tax in the redundancy month , he'd have got it back after tax year end*.

* slight caveat to 2) only is if it was close to 5th April and he was close to the threshold of 40% kicking in.

Priv said:
Pfft who’d of thought we had a board full of tax dodging tories 🤣
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Its call tax "planning" not "dodging"!!!
 
t4tomo said:
That was fundamentally stupid as
1) he appears to have lost his "up to £30k tax free" part by them doing that, being taxed at 20% instead.
2) even is he had paid some higher rate tax in the redundancy month , he'd have got it back after tax year end*.

* slight caveat to 2) only is if it was close to 5th April and he was close to the threshold of 40% kicking in.


Its call tax "planning" not "dodging"!!!
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This is in NZ, not the UK. different tax rules and was actually pretty smart as he would have lost $40,000 if they had paid him out on lump sum as would have been taxed at higher rate
 
Deepest apologies T4Tommo for any confusion, from now on I will put my exact location on any of my posts to avoid any confusion.
At the mo I'm on the bog in Taupo Bay, in Northern NZ enjoying a beautiful spring morning and waiting to watch the water go down the plug hole the opposite way to the Northern Hemisphere when I wash my hands.
Oh, and it's 10.04am, if that helps.
 
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