Post redundancy

Andyboy

I will be made redundant end of April 2011 and want to do a straw poll of "what would you do if faced by....."

I will be placed at the 40% income tax level (never earnt enough before to be in this position!) which will mean that for the rest of the financial year Apr 2011- Mar 2012 I will be a higher rate tax payer even if I only earn £500 a month (which is still a lot of money in my household).

If your were able to survive financially for the remainder of the tax year (11 months) would you still look for work or would you use the time to take a few courses that will ultimatley and hopefully benefit your future jobseeking prospects?

Can I just wish each and everyone who finds theirselves in a redundant position the very best of luck during these hard times and for the future.

happywarmgun

I took redundancy in November last year. Managed to fight for a good payout and so walked away with the equivalent of 15 months take home pay. Paid off the mortgage (not bad at 36!) and stared out the window and thought about what I wanted to do with my life. Whilst my natural instinct was to rush out and get another job - I realised the reason I had been happy to be redundant (and put myself forward for it) was that I hated what I did. I've used the cushion of the money to do what I always thought I would do when growing up and start my own business. It is early days and I have taken a gargantuan pay cut (so far - need to work on drumming up business) BUT I do have the redundancy cushion and I am honestly happier than I have ever been in my adult life. It is staggering the sense of liberation you have when you chose your own hours and have none of the office politics nonsense and only yourself to blame when things don't go your way - and only yourself to take the rewards when they do!

The time cushion is a gift. If you are OK for 11 months I would allow youself at least six or seven to 'do other stuff' and makes sure that when you do start looking for work again you're clear it is something you really want to do and if necessary have by then aquired some of the skills to do it.

You spend a lot of your one time on this planet at work so it may as well be fulfilling - you're a long time dead....

Andyboy

Thanks Happywarmgun (cool handle!)

What do you do now then? Let me know as it might help you drum up some business or you can PM if you like.

It is difficult when you are being constantly reminded that you are more re-employable the sooner you apply for work as you have the "work ethic" and are used to the daily routine. Just for your info I am looking at health & safety and environmental areas of training and work but would not have a clue what to do as my own business.

SarEl

I would offer another view. Whilst the previous poster is correct - you have some breathing space here to consdier the future, there are other considerations.

For the first 6 months JSA is not means tested assuming there have been sufficient contributions paid (which I am, otherwise the OP wouldn't have a decent redundancy payout). That means that it may not be a lot of money - but it is an entitlement, and I personally would recommend getting what you are entitled to. But that does mean that you have to prove that you are seeking employment. But beyond that entitlement, JSA is means tested, as are other benefits, and "disposing" of assets (like paying off a mortgage) doesn't mean that you will be entitled to benefits, as they can take this into account. And jobs are hard to get and not getting any easier, so what currently seems like a lot of months worth of money won't seem quite so generous six or ten months down the line.

The OP has the luxury of some time for planning and maybe, if self-employment or a business is the way to go (it isn't for everyone) to get plans in place now, or even start doing some qualifications part-time if that is appropriate. So maybe by the time redundancy has loomed, he will have a job or a clear plan, or even be just somewhere towards a plan. But at that stage I would suggest careful money management and getting any entitlements he can, so that whatever payments he has stay as intact as possible for as long as possible. That provides a pretty good cushion if things don't work out as planned, or take longer. There is then the opportunity to get through any period of unemployment with some degree of dignity and hopefully some finance intact, which can then be used afterwards for paying off mortgages or luxuries (although I would pay off any high cost debt like cards straight away).

A lot depends on how clear the OP is about what he wants to do in the future and how long that will take. I'd suggest that the amount of time between now and redundancy is one of the OP's biggest assets, because it allows for planning and getting well-informed about all the options - which he obviously is thinking about.

getmore4less

You will have a massive buffer if the redundancy payment puts you in the 40% bracket.

£30k tax free, 40% tax kicks in at £44875(might be more by then)

You could look at earning and putting it all into a pension wrapper

Andyboy

getmore4less wrote: »

You will have a massive buffer if the redundancy payment puts you in the 40% bracket.

£30k tax free, 40% tax kicks in at £44875(might be more by then)

You could look at earning and putting it all into a pension wrapper

If only that was an option.

I thank you but thought 40% kicked in at £37400 and wasn't due to change next year?

joerugby

Andyboy wrote: »

If only that was an option.

I thank you but thought 40% kicked in at £37400 and wasn't due to change next year?

There's also a £6475 personal allowance.

And GM4L's suggestion is spot on. Do some work. Anything you earn next year is tax free provided you put it in to a pension.

Andyboy

getmore4less wrote: »

£30k tax free, 40% tax kicks in at £44875(might be more by then)

I see (ty Joerugby) tax free allowance next year due to be £7475 + £37400 basic rate 20% = £44875. You also used the projected increased tax free allowance for 2011/12.

The pension idea sounds very good but is it easy enough to implement?

Also, SarEl suggested

wrote:

which can then be used afterwards for paying off mortgages or luxuries (although I would pay off any high cost debt like cards straight away)

Who would pay their mortgage off straight away and reduce their outgoings and who would advocate saving the money until a return to employment and then paying off the mortgage?

twc58

If I were you I would take the time off and use as you say to do a course and really think about what you want to do when you work again.
If you go straight into another job it may be the wrong one and you may never get this chance again until you retire.
I am in a similar situation and If I go I am going to wait until the next tax year before I start to look for work again.
Good luck for whatever you decide

Andyboy

Andyboy wrote: »

......

The pension idea sounds very good but is it easy enough to implement?

Also, SarEl suggested

Who would pay their mortgage off straight away and reduce their outgoings and who would advocate saving the money until a return to employment and then paying off the mortgage?

Just bumping these 2 questions. Especially interested in how the pension wrapper would work and ho easy it would be to implement?

happywarmgun

Just a word of warning on the pension thing.... Although it does sound a no-brainer (put your money in and it is tax free) don't forget that you get taxed at the other end with a penmsion. So when it is up a) You may have to buy an annuity with the sum and may not have too much choice in the timing or value you get from that.... and b) the income it generates is then taxed.

In most cases you are probably still better off doing it - particularly if you are a top rate tax payer now, but expect to be a 'normal' rate tax payer as a pensioner - just making you aware that it isn't quite the no-brainer it seems at first glance due to the loss of flexibility and the tax at the back end.