Tax rebate or not?

menollyke

Just a quick history. I went on maternity leave on 21st of april 2009 and stayed on maternity leave the entire year. I knew when I got back I would be made redundant, but wanted the redundancy money to come in the new tax year. I got paid the money on the 21st of april 2010. Part of this is taxed and part of it is not taxed. I will try to give as much detail as possible, but if I am missing something, please let me know.

Tax code till this redundancy pay was 647L, but on the payslip that shows the redundancy it is BR 0.

Severance NT 5443,00 (not taxed)
Taxable pay 7208,65 (consistent of smooth running bonus, termination bonus, training money, holiday gross)
PAYE 1441.60
NI EE's 385.33
ER's NI 861,78

Can I expect a tax rebate at the end of this tax year? Does the fact that it are bonusses that are paid affect the tax free allowance you can earn? Or does the redundancy money that is not taxed already takes up most of the tax free allowance?

We don't need the money but it would be a nice thing to get some tax back.

menollyke

Forgot to mention, I have not gone back to any kind of work and not planning for the near future either. (definitly not this tax year)

CLAPTON

you are entitled to your tax allowance so you have been charged too much tax; bonuses are just normal pay from a tax point of view
if you have no intention of returning to work this tax year then you can ask the HMRC for the tax back now

no-oneknowsme

Op - if you are planning to take Claptons advice and ask HMRC for a refund on over paid tax , the form you need to fill in and send to them is a form "P50" .

The P50 can be downloaded from the HMRC website and you send it to the tax office who deals with your employers tax affairs . This will not necessarily be the tax office closest to you. You can find out which tax office you need to send it to by either asking your employer OR by ringing your nearest HMRC enquiry centre.

jimmo

It is entirely normal for your severance pay or redundancy money to be paid separately from normal wages, salary, bonus etc.
In the taxman's terms the severance pay is treated as a "payment after leaving" and code OT is correct. However the first £30,000 is exempt from tax and National Insurance and so you being paid £5,443 with no deductions is entirely correct. In your mind you should put that money aside and totally ignore it when looking at your tax situation.
As others have already said, the money you have been paid as normal wages etc is taxable but it was all paid in April, the first month of the tax year.
The way the Tax Tables work means that you were taxed in April on the basis that you were on an annual salary of (12* £7,208.65) £86,503 and you have been taxed at 20% on some of the money and 40% on quite a bit.
This is nothing really to worry about but it does explain why the tax deductions were more than you may have expected.
As you have no intention of working again before April 2011 you can make what used to be known as a "cessation repayment" claim using a form P50.
here is a link.
http://www.hmrc.gov.uk/pdfs/p50.pdf
make sure you tick "Yes" to question 5.
As I said above, your redundancy money just does not come into this. All you need to worry about is what is on your P45.
My calculation of your liability for this year is
Pay 7208
Personal allowance 6475
Taxable income 733
Tax at 20% £146.60
Tax suffered £1441.60
Repayment due £ 1295.00.

menollyke

To make this slightly more complex. My P45 has been send out before they made the payment of redundancy and bonusses. So my P45 for this year shows 0 payment in this employment. If I were to fill in the form, do I just send it off with my P45 and my payslip?

jimmo

Oh! That could be a problem.
It now appears that your former employer has treated your final payment as a "payment after leaving" in similar fashion to your redundancy payment. The whole payment has been taxed at basic rate 20% and it is correct that you do not have the details on your P45.
Please see this link.
http://www.hmrc.gov.uk/guidance/cwg2.pdf
You will need to scroll down to page 15 "Standard payments made when, or after an employee leaves".
You will see from that that you should not get a P45 with the payment details on and that HMRC will not be informed of the details until the employer's annual Return is made some time after April 2011.
Unless somebody with more up to date knowledge than me know differently I am afraid that you will be in limbo until then.
Even then there is the very real possibility that whilst the payment was made in April, your employer considers that your employment actually terminated before April.
Then, if your employment terminated in 2009/10, I am afraid that the money you received in April will be assessable for 2009/10. That could completely wipe out any repayment depending on what taxable income you had in that year.
Can you confirm your employer's view of your termination date?

menollyke

I have left the company on the 20th of april this year. It was the return date of my maternity leave and they have not changed that. I am pretty sure of that. (according to my pension scheme I left end of april in their opinion) They actually paid me before receiving my P45, but the payslip only came in may. The payment shows up as an advance which is countered with all the payments.

Luckily we don't really need the money for the time being, so am not to worried about waiting untill april next year. Was just wondering if I would get a tax rebate at some point. (getting back over 1000 pounds is a nice thing to look forward to)

Edit: just to add, I just looked at the last link and looked at my payslip and it is for week/month 02 and the date of the payslip is 11/05/2010. I thought it was that case cause they normally do the payroll at the 11th of the month and I was of course made redundant half way the month rather than just before the 11th.