We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Beware of the redundancy tax trap!
Comments
-
THRIFTY_GIRL wrote: »Well I say....lawyers are not tax advisors, people who work at the tax office are not 'qualified' tax advisors, your employer is not a tax advisor...you have been warned:mad:.
Incidentally, your point here is well taken. Although one should at least expect an accurate statement from the tax office. Sad if that is not the case.
Where others lead, you should follow ...at least ten paces behind.0 -
spend2save wrote: »TG - I share your feelings about the tax credit system. When it works it acts as a total disincentive to progress at work where you get to keep 30% of any pay rise. And , when it doesn't work it takes 2 years trying to sort out an elemental mistake which led to my partner being accessed for £5k in overpayments.
One question for you, is that my partner is being made redundant in a few months with a fairly small payoff of £1250 in redundancy. I am content that this is not taxable, but will it count towards her gross pay, which in turn would lead to a 37% claw back in tax credits? If so, then that will also have to be bunged into the pension.
A genuine redundancy payment of this amount should not be taxable.
Generally things that are taxable are those that are included in the contract, for example unused holiday.MFiT - T2 # 64start date: 1.7.09 MFW end date: 31.10.17
Start balance: £205,746.51 :eek: Month 18/100..paid 13.50%
Current balance: £177,977.07 (updated 18.12.10)
Target 12.12.12: From £194,000 to £140,000:p
MFI-3 reductions: £16,023/£54,000 achieved (29.67%):j0 -
Incidentally, your point here is well taken. Although one should at least expect an accurate statement from the tax office. Sad if that is not the case.
Where others lead, you should follow ...at least ten paces behind.
I have spent many hours if not days telling the tax office that they are wrong....government department don't forget:rotfl::rotfl::rotfl:
Enjoy you holiday:TMFiT - T2 # 64start date: 1.7.09 MFW end date: 31.10.17
Start balance: £205,746.51 :eek: Month 18/100..paid 13.50%
Current balance: £177,977.07 (updated 18.12.10)
Target 12.12.12: From £194,000 to £140,000:p
MFI-3 reductions: £16,023/£54,000 achieved (29.67%):j0 -
THRIFTY_GIRL wrote: »... but I'msure you would rather have a refund than have money to pay!!
Unfortunately, no choice here - the employer is applying tax at the highest rate as it hits the final pay packet - leaving it all to be sorted out later - hence the scramble for the P50.0 -
spend2save wrote: »but will it count towards her gross pay,
I would say no, it should not be on the gross pay. We had our knuckles rapped recently by HMRC for including a redundancy payment in the gross pay of someone's P45 (albeit not taxed of course.)
PILON is of course a tax nightmare. I have also been reading of instances where PILON has been manipulated to be shown as compensation for breach of contract, but HMRC have sought to tax it where the two amounts were the same as they claimed it was just PILON under a different name. Read this is a reference book somewhere (the old fashioned way) so can't post a link.
I would also concur with posts above in that 'highest rate of tax' should be read as marginal rate of tax in all likelihood.Today is the first day of the rest of your life0 -
Anihilator wrote: »The rules are 30k Tax Free, above that at the standard tax rates the tax payer would pay.
What part of this is difficult.
I think you could well be in for a shock when you realise you werent entitled to keep the full 13k you reclaimed.
You shouldnt be spreading advice which is at best misconceived as plenty of idiots will follow it then be in the !!!! come April./
Sorry, missed this post of yours. Ok you've done what I asked for - offered up the "simple rule" you spoke of. Shame that this "simple rule" is neither easy to find (a reference or link would be nice) nor, it seems, is it understood by others who advised me in the first place (see other posts).0 -
(Ah hang on - I'm editing here, as I just realised that in this case you would "thankfully" probably fall below the £30K tax free part of the redundancy payment, so I guess you would be safe).
One should never assume - you do not know me or my financial situation.
As I am unaware of any impending redundancy, your theoretical assumption is somewhat flawed - thankfully!
As for your original post, there seems to be a lot of abiguity and as alluded to from a previous poster, should be ignored if the full and CORRECT facts are unknown.Indeed, do you feel that Martin Lewis's evident wealth disqualifies him from contributing to a forum on his own site, perhaps?
Sorry - but you are sinking your own boat here.
The difference being that Martin Lewis will post establish unambiguous FACTS on his own website.
Enjoy your trip(s).0 -
Is this post for real here?
I suspect that many of the posters on this forum will not be 40%'ers and will be more concerned about getting basic statutory redundancy and will not be concerned about someone who can obviously afford to be made redundant - assuming that is the case!
Are you saying that people who do enjoy a good salary and may even get a good redundancy payoff should the worst happen shouldn't worry about making the best of their lot?If you don't stand for something, you'll fall for anything0 -
A PILON is taxed at your normal rate eg basic or higher, it is viewed as the normal pay you would have received if you had worked your notice. Statutory or enhanced redundancy (where you are given a larger payoff) is tax free up to £30k provided your contract doesn't entitle you to it. Basically its the employer being nice as they've just taken your job away :rolleyes:.
An example would be if you were entitled to the 2 weeks redundancy as you had been with the co 2 years and your weekly pay was £100 so your statutory redundancy is £200 tax free. The company may decide to "enhance" this by £100 per week giving you a total of £400. This is all tax free.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 348.2K Banking & Borrowing
- 252.1K Reduce Debt & Boost Income
- 452.3K Spending & Discounts
- 240.7K Work, Benefits & Business
- 617K Mortgages, Homes & Bills
- 175.6K Life & Family
- 253.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 15.1K Coronavirus Support Boards