Termination Pay and P45/P60

JMCC88 · 15 January 2018 at 6:20PM

Hi everyone,

Does anyone know what the termination payment will look like on my P60 or P45? I have the option to get my termination pre 04 April, or post 04 April, so was wondering how this might look for a future employer.

While I will not lie to a direct question about my prior employment departure reasons, I would rather it not come up at all if possible.

I understand that up to £30k of the termination payment is tax free, so does that mean that if the amount is below £30k it wouldn't show up in the P45 or tax code at all? In that case it seems that taking termination in the new tax year would be better?

Thanks in advance for your help.

Comms69 · 15 January 2018 at 6:27PM

Do you mean redundancy?

If so, why wouldn't you want it to show up?? It's perfect excuse for looking for new job.

IanSt · 16 January 2018 at 9:58AM

I doubt that an employer is going to look at either until after they've interviewed you for any position, and even if they do, then as per Comms69, it's a perfect reason for you to be looking for a new position.

I think a bigger issue for you on which to base whether you get the redundancy this financial year or next is the tax you'll be paying on the taxable portion of your redundancy payment.

E.g. you'll be paying tax on any PILON that's being paid and you'll need to consider whether getting that paid in the next tax year is going to better for you - I know for me it definitely would have been, but unfortunately I never got a choice of date.

JMCC88 · 16 January 2018 at 12:48PM

It's the payout from an unfair dismissal, for which I understand the first 30k are tax free? Although in everyone's mind this is a clear unfair dismissal, it is not something my industry will necessarily view kindly.

Yes I get PILON if I terminate pre April, but no PILON if I terminate later in the year.

Personally I do not care about the PILON as the amount is negligible given the dates in question. I only care about what will appear on the P45/P60s. I figure that if I terminate pre-April, there will be a P45 from 2017-2018, which will show my full compensation for that period, including the size / lack of bonus, which is something I don't want to show. At the same time, I presume that if I terminate post-April, the termination payment will show on my 2018-2019 P45?

If there is any way to avoid the separation/termination payment showing up and yet still get a P45 for 2018-2019, that is what I would prefer to have happen.

Comms69 · 16 January 2018 at 1:05PM

Don't supply the P45? Fill out a P46?

ReadingTim · 16 January 2018 at 3:12PM

The HR/payroll person who inputs the numbers from your P60/P45 to the payroll system is hardly likely to be the person who interviews you and asks why you're leaving/left and then recalls that answer and realises what you said doesn't tally with your tax forms so calls you out on it...

What usually happens in reality is that you're offered the job and on your first day (or as soon as you get it, if later) you sent the relevant parts of your P45 to your new company's payroll department, where some data inputting clerk/HR drone copies the figures over. They're not interested in (or even paid to think about) what they represent - they're just making sure that the numbers on the form are correctly typed into the system.

Basically, you're overthinking this one, and the only decision is whether to take the money this tax year or next.

As you know what you're earned for 9 of the 12 months of this tax year, you can fairly accurately calculate your tax liability for 2017/18 whereas waiting until the 2018/19 tax year adds an element of uncertainty because you're less likely to know what you might earn.

anamenottaken · 16 January 2018 at 8:50PM

ReadingTim wrote: »

The HR/payroll person who inputs the numbers from your P60/P45 to the payroll system is hardly likely to be the person who interviews you and asks why you're leaving/left and then recalls that answer and realises what you said doesn't tally with your tax forms so calls you out on it...

What usually happens in reality is that you're offered the job and on your first day (or as soon as you get it, if later) you sent the relevant parts of your P45 to your new company's payroll department, where some data inputting clerk/HR drone copies the figures over. They're not interested in (or even paid to think about) what they represent - they're just making sure that the numbers on the form are correctly typed into the system.

.......

The Payroll person wont be inputting anything from a P60 and, unless you were interviewed for a job in Payroll and that person is your manager, won't know what you said in detail.

However that does not mean the person who did interview you doesn't see the P45. I was once interviewed by the person who became my manager and I had to pass my P45 to him when I began work. He did notice that the figures didn't quite appear to be what he would have expected and I had to give an explanation for the difference.

ReadingTim · 17 January 2018 at 1:41PM

anamenottaken wrote: »

However that does not mean the person who did interview you doesn't see the P45. I was once interviewed by the person who became my manager and I had to pass my P45 to him when I began work. He did notice that the figures didn't quite appear to be what he would have expected and I had to give an explanation for the difference.

Well, that scenario has never happened to me, and only happened to you once in how many jobs? More than one I should imagine. The OP will just have to take a view as to the likelihood that your isolated anecdote also happens to him/her, or not.

My 2p's worth is that it's extremely unlikely, and if they're worried about that happening, then they should also be concerned about things like getting hit by a bus every time they cross a road, or being abducted by aliens.

JMCC88 · 17 January 2018 at 6:34PM

Lol thanks for chipping in everyone. Ok so ultimately the answer to the factual part of my question is: yes all the numbers including the ex gratia payment (even the tax free element) are included in the P45/P60.

Just to add my anecdotal evidence, I am particularly concerned as a colleague of mine who departed was asked for 3 years' worth of P60s and his P45. A P46 sounds like a good idea. What happens though if I forget to send in my P45 and thus the new employer only has the P46?

ReadingTim · 18 January 2018 at 5:20PM

3 years' worth of P45/P60's are more likely to be to substantiate who your previous employers were, rather than how much they paid you or the reasons why you left.

Many companies outsource reference/background checks to 3rd parties, and they take a very literal approach - they simply want to see a certain document and tick a box to say it exists, rather than read or understand what it says. If they can't tick said box, their process gets slowed down, but it's not usually fatal to your application: I've certainly had reference requests delayed because all of the people I worked with have moved on, or the company doesn't exist any more, but never had an job offer rescinded due to it.

If you don't supply a P45, and only complete a new starter form (P46s don't exist any more), then I suspect the worst that could happen is that your tax is a bit messed up for a couple of months while your company reconciles your tax info with HMRC. That could result in you being temporarily taxed too much or too little. In the event of the latter, you'd then have to make up the difference, which may also be reclaimed through payroll. Depending on how tight your budget is, this may or may not be a problem for you.

JMCC88 · 21 January 2018 at 1:54PM

Thanks everyone. That is really helpful.

Termination Pay and P45/P60

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