P45 doesn't show details of redundancy payment and tax paid

I took voluntary redundancy from my job at the end of June. I was paid my normal monthly salary around 18th June. I was also sent a P45 at the same time. The P45 gave details of the 3 month's of salary and tax deductions for this financial year. I have just had my redundancy pay credited to my account and been sent a payslip which shows details of the payment and the (rather large!) tax deduction. It seems rather odd that this payment was not included on the P45. Surely if I was to start a new job and give them my P45 I would not be paying the correct tax?

I probably won't be working for quite a while but am hoping to be able to claim some tax back. Again, would that not usually involve producing a P45 when I apply to HMRC?
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  • superwoman4
    superwoman4 Posts: 184 Forumite
    noelphobic wrote: »
    I took voluntary redundancy from my job at the end of June. I was paid my normal monthly salary around 18th June. I was also sent a P45 at the same time. The P45 gave details of the 3 month's of salary and tax deductions for this financial year. I have just had my redundancy pay credited to my account and been sent a payslip which shows details of the payment and the (rather large!) tax deduction. It seems rather odd that this payment was not included on the P45. Surely if I was to start a new job and give them my P45 I would not be paying the correct tax?

    I probably won't be working for quite a while but am hoping to be able to claim some tax back. Again, would that not usually involve producing a P45 when I apply to HMRC?

    The redundancy payment itself is not taxable, but other parts of the redundancy package such as holiday pay and unpaid salary are.
    Your P45 will be correct. If you are going to sign on for JSA then hand in your P45. You wil get your tax refunded after the end of this financial year.
  • noelphobic
    noelphobic Posts: 2,297
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    The redundancy payment itself is not taxable, but other parts of the redundancy package such as holiday pay and unpaid salary are.
    Your P45 will be correct. If you are going to sign on for JSA then hand in your P45. You wil get your tax refunded after the end of this financial year.

    The redundancy payment was taxable. Only the first 30k is tax free and I got more than that and paid a sizeable amount of tax. I am confident I will get some of it back at some point as I probably will not work again until after the new tax year.
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  • McKneff
    McKneff Posts: 38,816
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    Will you not be job hunting, therefore entitled to JSA which is taxable.

    If so, you will be getting more 'income' throughout the year.

    You should do this anyway to get your NI credit.
    make the most of it, we are only here for the weekend.
    and we will never, ever return.
  • zzzLazyDaisy
    zzzLazyDaisy Posts: 12,497
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    The P45 is correct - it shows your emoluments of employment up to and including your last day of service (emoluments = wages, bonus, commissions, holiday pay earned during your employment).

    Redundancy pay is a severance package which, by definition is paid after the employment has ended and so does not go through the payroll and does not feature on the P45.
    I'm a retired employment solicitor. Hopefully some of my comments might be useful, but they are only my opinion and not intended as legal advice.
  • noelphobic
    noelphobic Posts: 2,297
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    McKneff wrote: »
    Will you not be job hunting, therefore entitled to JSA which is taxable.

    If so, you will be getting more 'income' throughout the year.

    You should do this anyway to get your NI credit.

    I won't be job hunting yet and therefore won't be claiming JSA. I do realise the implications re NI credits though.
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  • noelphobic
    noelphobic Posts: 2,297
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    The P45 is correct - it shows your emoluments of employment up to and including your last day of service (emoluments = wages, bonus, commissions, holiday pay earned during your employment).

    Redundancy pay is a severance package which, by definition is paid after the employment has ended and so does not go through the payroll and does not feature on the P45.

    so when I either start work, claim JSA or claim a tax rebate what do I produce? If I just produce my P45 would that not mean any future tax payments were incorrect, because it would not show my total income and tax paid for the year? I was sent a separate 'payslip' which does show the redundancy payment, tax paid and cumulative income and tax paid including the salary I earned in the 3 months prior to leaving. Would I need to give this (or a copy) to my new employer, DWP or HMRC?

    It's the first P45 I've had for about 25 years and I've only ever had one very small redundancy payment previously which wouldn't have been taxable, so rather confused by the whole process! :( Was also rather shocked to get my P45 before I had even left - felt like they were glad to see the back of me. :eek:
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  • dzug1
    dzug1 Posts: 13,535
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    It's more than likely that whatever you do it will require sorting out at the end of the tax year with either a refund due or tax owing
  • zzzLazyDaisy
    zzzLazyDaisy Posts: 12,497
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    If you get a new job you give the employer the P45 in the normal way.

    Your old employer pays any tax due on the severance payment but only at the basic rate.

    It is your responsibility to complete a self assessment form if you are a higher rate tax payer. If your earnings for the year plus the taxable element of the severance payment drops you into the higher rate tax bracket for this tax year HMRC should send you a self assessment form, but as I say, it is your responsibility, so if it is looking that way, it is worth giving them a ring.

    Otherwise it will all come out in the wash at the end of the tax year.

    The reason employers don't deduct 40% tax on a redundancy payment is precisely because they have no idea how much you will earn between leaving one employment and the end of the tax year. If you earn nothing more, you may be just a basic rate tax payer.

    Hope this helps
    I'm a retired employment solicitor. Hopefully some of my comments might be useful, but they are only my opinion and not intended as legal advice.
  • noelphobic
    noelphobic Posts: 2,297
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    They have taken more than 20% in tax. They did send me a letter before I was paid explaining how it was calculated. It said I would be put on a week 1 code I think? So I have overpaid rather than underpaid tax by my calculations.

    I will leave it until April then I think, although I will probably be looking to start claiming JSA sometime before the end of this tax year. If I have worked it out correctly I think that would be the latest I could claim because I would need to have full NI contributions for the 2 full tax years prior to putting a claim in. There's always the possibility that I will have a job before then but I am concentrating on finishing my degree and sorting a few things out at home first.
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  • There are three stages of documents that are generated when being made redundant. The first is final payment (salary, overtime (if applicable), holiday pay etc). This produces a final salary slip and payment, and is subject to the normal PAYE and NI deductions and will still take into account your tax code at the time of leaving. This is considered as a pre-P45 payment. Second, a P45 is produced which will be used by next employer or if seeking benefits (e.g. Job Seekers Allowance) will be used by Job Centre Plus. If still claiming JSA in the next tax year (i.e. From 6th April) and the year AFTER redundancy, the Department of Works and Pensions issue the claimant a P60 (as of 5th April - the year of redundacy) and in all probabilty a tax refund, which the claimant will automatically receive. Third, Redundancy Payment - this is considered as a post P45 payment and is taxed using 0T tax code. The first £30,000 is tax free. Payments over this amount are taxed as 1/12 of the '20% tax band' i.e. £32,010x1/12th =£2,668 and taxed at 20% (£554 tax paid); then 1/12 of the '40% tax band' i.e. (£150,000 minus £32,010)x1/12th =£9,833 and taxed at 40% (£3,933 tax paid) and finally, if the reduncancy figure is high enough, the balance is taxed at 45%. These tax bands are for 2013-14 tax year and will obviously change for 2014-15 and these should be noted if redundancy occurs in the 2014-15 tax year. There's plenty of information on the 'official' HMRC site.
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