£18,000 Tax this month
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stevsand
Posts: 56 Forumite
in Cutting tax
My friend was made redundant this month,his yearly wage is £24,000 a year but he received £73,000 this month and was taxed £18,000 for the month.This cannot be right?
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sounds about right to me, if you look at it its 3years wages so £6000 a year in tax for £24,ooo is about right but imagine shock to all go at one time.0
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I think it might well be right, but worth asking his ex-employer to explain the bill.
IIRC the first £30k of redundancy payments are tax free, so that leaves £43,000 taxable. £18k is just over 40% of £43k.
I'm not sure how tax on redundancy payments is worked out (and am ready to stand correct ), but if the ex-employer had assumed that your friend would continue to earn £43k per month for the rest of the tax year a 40% tax rate isn't that unreasonable. Some of that tax might come out in the wash at the end of the tax year and he'd be due a tax refund.0 -
Looks about right to me.
Good redundancy deal too! A lot of people get one month per year's service.British Ex-pat in British Columbia!0 -
£30,00 is tax exempt his taxable pay was £45,000 so is £18,000 not ignoring his personal allowance and the twenty% up to a certain limit?0
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It might be, but if it is it will come out in the wash at the end of the tax year.0
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I think he has been overtaxed by 9k,thats quite a lot to just wait until the end of the tax year for.
He has only been over taxed if he doesnt earn anymore in the tax year!:heartpuls baby no3 due 16th November :heartpulsTEAM YELLOWDFD 16/6/10"Shut your gob! Or I'll come round your houses and stamp on all your toys" The ONE, the ONLY, the LEGENDARY Gene Hunt :heart2:0 -
Assuming he is not going to sign on, he can make an unemployment repayment claim to HMRC once he has been unemployed for 4 weeks. If this is repeated, he will gradually be refunded the higher rate tax, Its the way the PAYE system works.£705,000 raised by client groups in the past 18 mths :beer:0
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Looks about right to me.
Good redundancy deal too! A lot of people get one month per year's service.
A very good deal as most companies pay the Statutory Minimum which is 1weeks pay for each year served under 41years old, and then 1.5week per year served over 41. Also, the weeks pay is capped at £380!
I wish my company paid 1 month per year - as I am at risk at the moment and that redundancy payment would be significant!
John0 -
He has already earned £4000 this year through salary (24k/12 x 2)
I take it he has then received a £71k redundancy payment. (£71k+£2k) £30k is tax exempt, so he has earned £45k so far this year. Minus the £6475 personal allowance = £38,525 taxable.
£37,400 taxed at 20% = £7480
£1,125 taxed at 40% = £450
Total income tax due assuming he does not work again until FY 11/12 = £7930. If he has paid £18k this month and the normal £300 or so tax last month then he at the moment has overpaid tax to the tune of £10.4k.
If he does not work again, he should see this come back in a rebate probably this time next year. If he does work again, then the PAYE may be able to adjust so that he does not pay anymore tax for the remainder of the year. If it doesnt adjust and he is still taxed then he will get a good tax rebate back a year or so down the line.
£73kpm is well into 50% taxation.0
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