Did you know?

Butterfliesarepretty

I took voluntary redundancy in April 2008 over 22 years of employment. So got a decent package. Just found out from a friend of mine who also left at same time as me that if you are not going to work from April 08 - April 09 you can claim a tax refund. You are taxed on your redundancy payment as if you are still employed, now if you can not get work or don't work for other reasons you can claim back that overpaid tax. My friend is caring for someone and so she has a partner who works so she does not need to. She claimed back £6k after four months of filling in forms and hassling the inland revenue.

I am looking for work and once I get a job I can claim a tax refund for the time I was unemployed. It might not be as much as my friends but its worth enquiring about.

Reds-on-Sea

That's very interesting. How does it work though? I don't know how tax is worked out. Say you're made redundant in Jan & unemployed from Jan to August (say 8 months) and then get a job.... How do they work out how much tax you should pay? Is it worked out on a weekly basis as most people get paid a week for every year right? do they carry on calculating it as if you were getting paid weekly, in your case for 22 weeks after redundancy? Or in my case 5 weeks after redundancy? If I didn't get a job for 5 weeks, would I have to pay any tax at all?

Butterfliesarepretty

Hi,

Yes not sure how it works but my friend had to provide p45, remittance of redundancy payment etc and somehow it was worked out. You will find it on the inland revenue website. Under tax refund.

LittleVoice

Reds-on-Sea wrote: »

That's very interesting. How does it work though? I don't know how tax is worked out. Say you're made redundant in Jan & unemployed from Jan to August (say 8 months) and then get a job.... How do they work out how much tax you should pay? Is it worked out on a weekly basis as most people get paid a week for every year right? do they carry on calculating it as if you were getting paid weekly, in your case for 22 weeks after redundancy? Or in my case 5 weeks after redundancy? If I didn't get a job for 5 weeks, would I have to pay any tax at all?

The original post suggested being unemployed for a whole tax year (April-April). If the taxed redundancy pay had been paid on or after 6 April, then it would have been taxed under PAYE as though that was the rate of income for the whole year. Because it wasn't, a tax refund was due.

If you are redundant in January, then your income for the year from the previous 6 April to the following 5 April is taken into account for the whole year, and again you are likely to have a tax refund due to you because of the reduced income in the latter months - though JSA is taxable too.

From 6 April to August is a new tax year. You wouldn't be paying tax if not working but when you start work in September you benefit from the tax-free allowance that has been accumulating through the year.