First 30k tax free

KingLarsson

hello

i took voluntary early retirement on 31/03/10. i did not get the first £30k tax free, i got 6 months pay tax free and the rest of my package was then taxed.

i have writing to the tax office a total of 3 times now and i still do not have a reply. my previous employers say i was not entitled to the first £30k tax free only my 6 months pay. does anyone know a reason for this ?

sammyjammy

The tax free amount of £30,000 applies to everybody that pays tax in this country, however Payment in lieu of notice is not?!!? Perhaps they have their wires crossed

http://www.hmrc.gov.uk/manuals/eimanual/EIM13505.htm for redundancy
http://www.hmrc.gov.uk/manuals/eimanual/EIM12975.htm for PILON

KingLarsson

thanks sammyjammy

this is what my work said regarding my payoff:

"I don't have any of the formal paper work, all we are given is the amounts to pay, which are shown below. I've an email HMRC regarding Capitalised Payments which is for our use only but basically states that these payments do not form part of a formal redundancy package and should therefore be taxed.

Compensation £***** - All tax free, this is 6 month salary.
Capitalised £***** - All taxed"

markandkate

How were you paid your notice pay? if is was monthly then it counts as wages and not pay in lieu and is therefore taxable.

KingLarsson

markandkate wrote: »

How were you paid your notice pay? if is was monthly then it counts as wages and not pay in lieu and is therefore taxable.

everything was paid together as a lump sum on 31/03/10.

MrRedundant

Irrelevent. Anything contractual such as Holidays, Benefits etc are taxable. Only the direct redundancy payment is tax free.

Can you give the full details of your package and we can assess what was taxable.

john59_2

Are you in a trade union? if so contact the bods.
If not as Mr reduntant says, more details

getmore4less

Finding out what you should pay is a good idea so you are informed.

HMRC
If writing is not working

Phone.

Make an appointment with your local office.

Hastobe_Katt

Putting aside amounts that are specifically redundancy payments (so within 401 ITEPA 2003 - i.e. compensation / damages for loss of employment and subject to £30k limit), anything that is 'derived from your employment' is taxable. This includes holiday pay or any other payments that are provided for by your contract of employment including payments in lieu of notice. It can also extend to 'ex gratia payments' where there is an expectation of such a payment being made - for example where it has become accepted practice to make such a payment.

It's only payments of damages that are tax free up to a max of £30k.

PS I WOULD NOT ask your tax office for advice. They will be only too delighted to tell you it's taxable - whether it is or not. Discuss the matter with your ex employer or take independent advice.

KingLarsson

here goes, hope you can make sense of this ! i was 45 and therefore do not get the annual payment.

1. VOLUNTARY EARLY RELEASE TERMS WHERE A SURPLUS HAS BEEN


1.1.1 Immediate payment of lump sum based on pensionable service enhanced by up to 6 2/3 years & pensionable final earnings, plus preserved pension.
1.1.2 Continuing Annual Payment to normal retiring age (60/65) based on service enhanced by up to 6 2/3 years.

1.1.3 Six months compensation payment always based on 100% pfe. This compensation payment will be reduced by one-thirty-sixth for each month of service (counting any part of a month as a full month) after reaching the age of 57.

* - NB. For employees aged 40-49 (40-54 with effect from April 2010) the value of the benefits they would have received under the above terms will be capitalised & discounted & will be paid immediately on leaving as a single lump sum compensation payment.

The elements included in the lump sum compensation payment are as follows:

·[FONT=&quot] [/FONT]The value of the continuing annual payment (pension) from the date of leaving to normal pension age calculated using reckonable service including any enhancement of service due under the above arrangements;
·[FONT=&quot] [/FONT]Compensation for not paying the commencement pensions lump sum until normal pension age rather than at date of leaving;
·[FONT=&quot] [/FONT]The value of pension arising from enhanced service only from normal pension age for life;
·[FONT=&quot] [/FONT]The value of a lump sum arising from enhanced service only; &
·[FONT=&quot] [/FONT]The value of a contingent spouse pension arising from enhanced service only.

The lump sum compensation payment will be calculated by the Pensions Administration Office on a basis determined by the Government Actuary’s Department.

The compensation payment of up to six months pensionable final earnings will be paid separately & in addition to the lump sum payment described above.

getmore4less

Looks to me like you get 6 month redundancy.

The rest of the payment appears to be related to pension entitlements which I think would normaly be taxable. Allthough not sure about the lum sum eliment that is normaly tax free at retirement

Any PILON and holiday would also be taxable.