Redundancy and avoiding tax
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kevkj
Posts: 88 Forumite
Not sure which was the best forum so apologies.
Hi i hope some Guru can help me .
I a thinking of taking redundancy at Xmas 2017.
My salary is £43,800
I have worked for the company for 37 years and the figure is expected to be £54,000 including 90 days lieu.
Obviously i can take £30,000 tax free .
By Xmas i would have expected to have earned around £33,00.
After taking the £30K tax free then the other £24,000 would be taxable at i assume 40% or possibly some between 33k and 44 or so at 25%.Which would be around 10k to the tax man at worst.
I have a works pension that i pay 9% of my salary into.
Has anyone any advise how to lower this taxable figure.
Could i put a lump sum into a pension ,if so how much?
Is opening a SIPP an advantage.
Hopefully someone can assist me.
Hi i hope some Guru can help me .
I a thinking of taking redundancy at Xmas 2017.
My salary is £43,800
I have worked for the company for 37 years and the figure is expected to be £54,000 including 90 days lieu.
Obviously i can take £30,000 tax free .
By Xmas i would have expected to have earned around £33,00.
After taking the £30K tax free then the other £24,000 would be taxable at i assume 40% or possibly some between 33k and 44 or so at 25%.Which would be around 10k to the tax man at worst.
I have a works pension that i pay 9% of my salary into.
Has anyone any advise how to lower this taxable figure.
Could i put a lump sum into a pension ,if so how much?
Is opening a SIPP an advantage.
Hopefully someone can assist me.
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i would just pay the excess over 30k into you pension - however there are some rules on the maximum amount you can pay in one year (possibly max of your salary but even with that you are under.)
You should feel like you got all you money back.0 -
Just a bit more information i will be 54 and 3 months when i take redundancy and i planned to leave at 56 whatever.0
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i would just pay the excess over 30k into you pension - however there are some rules on the maximum amount you can pay in one year (possibly max of your salary but even with that you are under.)
You can contribute around 40k a year to your pension I believe.... Tax free wise...
You should feel like you got all you money back.Just a bit more information i will be 54 and 3 months when i take redundancy.
Putting the remainder in your pension is probably the most sensible thting to do!0 -
Great info folks ,one last thing i paid into AVC probably 10 years ago for two years ,but we changed company name (got took over) and a new pension company also took on our AVC which means i have a daft amount of £2500 in the original.Could i ask for the money to be paid into the original one for ease or only the new pension company who our works took on for AVC the only option.
I am currently in a Defined benefits pension.0 -
Great info folks ,one last thing i paid into AVC probably 10 years ago for two years ,but we changed company name (got took over) and a new pension company also took on our AVC which means i have a daft amount of £2500 in the original.Could i ask for the money to be paid into the original one for ease or only the new pension company who our works took on for AVC the only option.
I am currently in a Defined benefits pension.
Possibly, depends on whether the scheme allows it so you'd need to ask your HR or finance or maybe the scheme administrators.
In terms of putting it into your current pension then if it's a db pension you need to find out how this would work, would it buy you added years, would it be treated as an avc?
It might be easier to open up your own personal pension or sipp and put the money into that, thou it would be a bit more hassle as you'd need to claim tax back from Hmrc. It may well be more flexible though as you would be able to access as soon as you hit 55, and 25% is tax free with any further payments taxed at your marginal rate.0 -
.. thinking of taking redundancy at Xmas 2017. ...
I have worked for the company for 37 years and the figure is expected to be £54,000 including 90 days lieu.
Obviously i can take £30,000 tax free .
By Xmas i would have expected to have earned around £33,00.
After taking the £30K tax free then the other £24,000 would be taxable
I suggest you calculate your taxable income for 17/18 i.e. £33k plus the pension income you expect to receive before April 6th 2018. Add on any other taxable income. Subtract the total from the Higher Rate threshold (£45k). The difference is the amount of 20% tax band you've got left unused. Subtract that from the £24k to see how much would be subject to 40% tax. Suppose, for the sake of illustration, that it's £20k. Then £20k is the gross amount you should contribute to, say, a SIPP. You actually contribute the net amount, £16k, and the provider claims back the £4k tax relief. (For a modest sum such as £20k, Hargreaves Lansdown would be a good provider. Other people like Cavendish, or AJ Bell, or ....)
Then you should inform HMRC what you've done so that they can refund the extra relief due to your having avoided 40% income tax.
Another view is possible. If you don't expect to be earning again, then 17/18 will be the last tax year when you can make a really large pension contribution because it will be the last tax year when you have substantial relevant earnings, namely the £33k of salary plus the £24k of taxable redundancy pay. Your circumstances might make that attractive to you, but there would be various complications to consider.Free the dunston one next time too.0 -
I do not plan to retire to 2019-20 tax year.
It seems if i pay the money into my pension it goes into a AVC which obvously i can take 25% tax free next year or the year after,would i be best opening it now and paying some in over the next few months whilst waiting for redundancy and therefore having it set up.Or will they atomaticaly set me one up when i am made redundant for what would be the taxable amount.0 -
Open it ready with t he smallest possible amount, or with a monthly payment if you have spare income.
But it shouldnt take too long to open once you are being considered/have been asked to take VR
If you want a Sipp, open it now.0
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