Redundancy and CA

Vincey

Help... I am sure this is an easy question for some tax expert
I am being made redundant on 15th March and I am being offered the following.

a) A redundancy payment of £18,526.88 including a statutory redundancy payment of £7,410
b) Payments and benefits in lieu of 6 months notice as follows:
(1) salary: £24,602.50
(2) car: £3,100
(3) healthcare: £771.83
(4) £2,280.24 in lieu of unused entitlement to holiday

This Package totals circa £49,000 payable on or before 31st March

What are my options...what would the best tax efficient way of taking the money?
I am already paying tax at 40% in this tax year 2009/10
Can I ask my employer to put circa £19k into my AVC pension and take £30k tax free....what do you suggest is my best options to pay as little tax as possible please

many thanks in anticipation

getmore4less

Redundacy is tax free <£30k

the rest is likely to be taxable.

Best option it to get them to delay till the next tax year, still taxable but if you don't earn as much in the tax year it might save you some tax.

Perhaps use a few days holiday to change the termination date.

You could put all the taxable pay into a pension the AVC or maybe time for a SIPP.

You might be able to get part of the PILON tax free but if contractual or normal company policy this is likely to be a problem.

Vincey

Thank you guys your replies....would you know what amount of Nat Ins I would have to pay on the PILON element ?

many thanks

Uncertain

Vincey wrote: »

Thank you guys your replies....would you know what amount of Nat Ins I would have to pay on the PILON element ?

many thanks

Pretty much what you would have paid each month times six.

Just to clarify, it is only redundancy / compensation up to £30K that is normally tax free. Anything else that is your legal or contractual right is taxable in the normal way.

Does you contract require 6 months notice (this is quite a lot)? If it is only three months (say) then it could be argued that the extra three months is compensation?

Vincey

Yes I managed to negotiate a 6 month notice period
It was actually 6 + 3 .......3 months notice from me and 6 from them

So in theory could I "save" all my PILON into my AVC apart from the NI and not pay any away on the 40% tax?

I am a 40% tax payer already can someone advise the NI % please

many thanks in anticipation !

Uncertain

Vincey wrote: »

Yes I managed to negotiate a 6 month notice period
It was actually 6 + 3 .......3 months notice from me and 6 from them

So in theory could I "save" all my PILON into my AVC apart from the NI and not pay any away on the 40% tax?

I am a 40% tax payer already can someone advise the NI % please

many thanks in anticipation !

I may be misunderstanding you but if your contract requires them to give you six months notice then this is taxable. However if they are only required to give you 3 months but are choosing to give 6 (PILON) then I think the extra three months should (could) be part of the redundancy payment and therefore tax free.

NI Rates are here
http://www.hmrc.gov.uk/rates/nic.htm

A wet towel over my head and a stiff drink are needed to work this out quickly but all the information should be there!

Vincey

They have to give me 6 months notice of termination and I have to give them 3 is what I was trying to say.

So my PILON is 6 months as written into the CA I received.

I would still like to know about the AVC question if anyone knows please ?

Many thanks