tax on redundancy pay

Benjamin10_2

I'm about to take redundancy and my employer states my compensation payment will be made on 1/4/10. This falls in the curent tax year when I am liable for 40% tax on any payment over 30K (due to earnings accrued this FY). However, if it were paid in the new FY (during which I will have minimal earnings) it would only be liable for 20% tax on anything over the 30K.
Is there any way around this as it would seem for the sake of a few days I will lose out to the tune of 10K?
Anyone out there able to help? Much appreciated.

Newbiesw

Is it going to be paid and included with your salary or as a separate payment ?

Newbiesw

getmore4less

Is it all redundancy or is there PILON and holidays included?

You may need to work for a few more days and get your termination date moved.

Easter holiday might help 1st is a thurs 6th is only one working day later.

I think there is a case that means the tax is due for when the payment is due not when actualy paid. (perhaps someone can find the relevent links)

Can you use a bit of holiday to move the date?

Is there PILON so you can work a bit of motice and they can legitimately pay you a bit later.


Is the company trying to get the payment in this financial year for accounting which will make it difficult to move?

Newbiesw

Was trying to determine the relevance of pay date of 1st April, this is a Thursday, not a usual weekly paid payday (traditionally Friday) and if monthly paid, unlikely to have April salary paid on 1st April.?
It appears then that they could be making this as a separate payment and maybe manually adjusting your year-end figures for 09/10 in which case it will be 40 %.
If monthly paid, then this will have to be "fed through" the April payroll which means new tax year and 20% tax.
Unfortunately we do not know what your Payroll intentions are.

Newbiesw

Sunshine12

When I was made redundant they put the redundancy payment through as "compensation for loss of earnings" so it wouldnt be taxable.

getmore4less

Sunshine12 wrote: »

When I was made redundant they put the redundancy payment through as "compensation for loss of earnings" so it wouldnt be taxable.

This will be over £30k so taxable.

getmore4less

Newbiesw wrote: »

Was trying to determine the relevance of pay date of 1st April, this is a Thursday, not a usual weekly paid payday (traditionally Friday) and if monthly paid, unlikely to have April salary paid on 1st April.?
It appears then that they could be making this as a separate payment and maybe manually adjusting your year-end figures for 09/10 in which case it will be 40 %.
If monthly paid, then this will have to be "fed through" the April payroll which means new tax year and 20% tax.
Unfortunately we do not know what your Payroll intentions are.

Newbiesw

Good point if they normaly close the financial pay year in March it might be OK and count as new tax year money.

If it will get taxed at 40% you could look at the pension option for the surplus.

Benjamin10_2

Thanks for the advice so far.
Essentially this is a departure scheme that the Department have to complete before the end of this FY. I therefore have to leave on 31/3/10.
They won't tell me how I will receive the compensation payment except to state that they intend payment on 1/4/10.
I am paid monthly so if they pay me on 1/4/10 it won't be incorporated into March's payroll. I therefore suspect it will be paid separately.
From what you say I guess it depends whether this payment will be included in pay, or made separately? If I mange to get it in the April payroll I may get away with 20% tax - otherwise I'm stuffed!

Newbiesw

Benjamin10 wrote: »

otherwise I'm stuffed!

Don't buy the Sage & Onion just yet, not necessarily.
The amount of gross pay/Cost is not going to affect your employer whether they pay you in March or April but it will affect you personally being a potentiial personal tax loss of 20%.
When would your normal pay date be ?

Newbiesw

Benjamin10_2

31/3 and 30/4 (end of month)

Pete111

Ask them to pay you redundancy after April 5th. They can do this as a 'payment after leaving' to ensure it does not hit your p45 this tax year. Alternatively you could ask them to pay the redundancy element in the April payroll after you have left.

We sometimes do this when redundancies occur at the end of the tax year and our Head of Tax is perfectly fine with it.