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!

12346»

Comments

  • amanda40
    amanda40 Posts: 1,218 Forumite
    It is so much to take in!! Head is spinning too!!

    If you are due nontaxable PILON but your redundancy pay is over £30,000, do you pay tax on non taxable amount too ( IYSWIM) Ie do they just add it on to redundancy payment .
    No Longer addicted to Boots! - Well not today anyway!! :blushing:

    Officially Mortgage free 31/07/2017 , 12 years early :j
  • JPA61
    JPA61 Posts: 10 Forumite
    Of course although redundancy pay is income, it is compensation for loss of future earnings, not additional earnings (i.e. as a bonus would be) for work done.

    Other countries (for instance Ireland (with its top-slicing relief), and New Zealand and Germany) mitigate for redundancy payment taking earnings for the tax year into a higher tax band. It seems that in the UK you could be working for most of a tax year before being made redundant, getting slapped with 40% tax on most of your redundancy money, and then finding yourself unemployed for the whole of the next tax year.
  • JPA61
    JPA61 Posts: 10 Forumite
    Hey, you haven't been working for a certain IT service provider have you?

    I was made redundant together with several of my team-mates yesterday (11th December) too.
  • amanda40
    amanda40 Posts: 1,218 Forumite
    JPA61 wrote: »
    Hey, you haven't been working for a certain IT service provider have you?

    I was made redundant together with several of my team-mates yesterday (11th December) too.

    I think it may have been;)
    No Longer addicted to Boots! - Well not today anyway!! :blushing:

    Officially Mortgage free 31/07/2017 , 12 years early :j
  • amanda40
    amanda40 Posts: 1,218 Forumite
    jimmo wrote: »
    I can really appreciate that your head is spinning with this. It is hard enough for those of us who have professional experience to analyse individual cases.
    All I can suggest is that you take your time and if your head is spinning, take a break, relax and come back to it when your head is clear.
    I hope this doesn’t sound too pedantic but there is no such thing as non-taxable PILON. PILON is taxable as are all other redundancy payments. However you do get one, single exemption for the first £30,000 of the compensation elements in the redundancy package.
    So, no matter what the circumstances, the best a person can hope for is that £30,000 of the redundancy package will be free of tax.
    I think that answers your question. If it doesn’t please say so and I will try again.

    Yes thanks i think my questions are answered now. I work for HMRC and have problems trying to figure it all out.:T
    No Longer addicted to Boots! - Well not today anyway!! :blushing:

    Officially Mortgage free 31/07/2017 , 12 years early :j
  • amanda40
    amanda40 Posts: 1,218 Forumite
    No perks in HMRC nowadays I'm afraid - I am a lowly RO or assistant officer ii think we are called now - it is all my grade in my area, so dont have contact with any one I could ask.
    No Longer addicted to Boots! - Well not today anyway!! :blushing:

    Officially Mortgage free 31/07/2017 , 12 years early :j
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

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

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.