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Tax on Redundancy Payment
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Sowgelder
Posts: 1 Newbie
Hi,
I am being made redundant Sept 09 and will pay around £10K Tax on my Redundacy payment.
I am 51 so cannot access my final salary pension until I am 55.
Can I make an AVC (Additional Voluntary Contribution) into my Pension, or take out an ISA, for upto this amount.
This way at least I get the money albeit in 4 years time.
Surely better for me than the Tax man to have it?
I am being made redundant Sept 09 and will pay around £10K Tax on my Redundacy payment.
I am 51 so cannot access my final salary pension until I am 55.
Can I make an AVC (Additional Voluntary Contribution) into my Pension, or take out an ISA, for upto this amount.
This way at least I get the money albeit in 4 years time.
Surely better for me than the Tax man to have it?
0
Comments
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How much is your payment/ All redendancy opayments under 30k should be tax free.
If it is over this then many pensions will allow an AVC so this may be an option. Pretty sure the ISA idea is a no go as you would need to be paid the money to set it up and it would usually be taxed at source.
We sometimes allow people who would otherwise be exopected to earn enough to pay higher rate tax to take any redundancy payments that would be taxed with Basic Rate deducions only (they sign a waiver). Obviously, they would be expected to pay the remainder if appropriate at the end of the tax year if they have breached the threshold.
Have a chat with your HR/Payroll team - they may be able to advise better
PGo round the green binbags. Turn right at the mouldy George Elliot, forward, forward, and turn left....at the dead badger0 -
Sowgeler: I went through trying to figure out if that was a smart thing to do with mine (though I am a lot younger than you). The problem with the AVC is that - yes you save the tax this year - but when you come to take your pension at the other end that is then the income it generates is taxed then.
If you are a higher rate tax payer now, and expect to be a lower rate tax payer at pension then it probably is worth doing. If not and you are happy managing your own money, you may better taking the tax hit now - sticking what's left in an ISA or similar tax free investment and keeping it there till your retirement. At least your in control and have access to it sooner if circumstances demand.0
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