Redundancy sum and tax

BoxerfanUK

Ok there are a couple of similar threads on this, but rather then jump in on someone elses thread I thought it better to start my own.

A colleague of mine (civil service) has applied for voluntary redundancy and expects to leave on 31st March 2011

He expects a payout of around 21 months pay (£78,750.00) and 3 months pay in lieu of notice on top (£11,250).

He seems to think that he will get the first 30K tax free (which I agree), but then still be able to offset his personal allowance PLUS the 20% tax band BEFORE any of the redundancy amount enters the 40% tax banding in this current tax year!!!

I have told him that I'm not so sure that he's correct, as he already has his earnings for this whole tax year (up to 31st March 2011) for which his personal allowance and 20% band will have already been used up.

1) WHO IS CORRECT?

2) As he may be jobless for a period after 31st March, would it benefit him at all if he recieved his redundancy sum after 6th April 2011 (new tax year) and therefore, would he then (as he thought) be able to offset his redundancy payout using the 30K tax free, plus tax coding plus 20% band with the remainder into the 40% band.

3) If (2) is correct, if he then started paid work in that tax year would it all be at 40% as all of his allowances would have been used by his redundancy payout?

Hope this all makes sense.

Cheers

LittleVoice

BoxerfanUK wrote: »

...
A colleague of mine (civil service) has applied for voluntary redundancy and expects to leave on 31st March 2011

He expects a payout of around 21 months pay (£78,750.00) and 3 months pay in lieu of notice on top (£11,250).

. . .

As it is voluntary redundancy, is he sure about the PILON? (Don't know about civil service scheme but in the NHS voluntary redundancy excludes PILON whereas compulsory redundancy allows it.)

If he is working up to 31 March, doesn't that take care of the notice to which he is entitled?

BoxerfanUK

Hi, he hasn't left yet and all the paperwork etc may not be sorted for sometime yet so hence PILON, although he's more interested in the tax implications regarding the payout to be honest, but thanks anyway.

tommytynan123

I'm a Civil Servant so I read this with interest.
Certainly my department have not yet been made aware of numbers with regard to Coalition plans for reducing size of Civil Service. I'm surprised this thread has no mention of this. I have just found out the result of the ballot (Prospect) and, as expected, was a 'yes'. Only now can the butchers start slicing !!!

''A colleague of mine (civil service) has applied for voluntary redundancy and expects to leave on 31st March 2011
Is this linked to the new scheme ???

He expects a payout of around 21 months pay (£78,750.00) and 3 months pay in lieu of notice on top (£11,250).
Normally Vol Red would not attract PILON (I think) but must check the new scheme.

If he is working up to 31 March, doesn't that take care of the notice to which he is entitled?
Again linked to the new scheme - it's not ratified yet so I can't see how 3 months can be agreed yet with date (March)

Finally - sit down before you read this bit !!
Paperwork, agreements, dates etc - 20 yes 20 months ago I was being lined up for early departure as my post was axed. (I had no major snags with that) So here I am 20 months on still on gardening leave and even now no real dates ahead. All on full pay !!
Suggest a chat with the pay people may help. I am assuming from the annual pay the person is quite high in the structure (I'd guess at 1 above me) but no mention of pension ??

BoxerfanUK

tommytynan123 wrote: »

I'm a Civil Servant so I read this with interest.
Certainly my department have not yet been made aware of numbers with regard to Coalition plans for reducing size of Civil Service. I'm surprised this thread has no mention of this. I have just found out the result of the ballot (Prospect) and, as expected, was a 'yes'. Only now can the butchers start slicing !!!

''A colleague of mine (civil service) has applied for voluntary redundancy and expects to leave on 31st March 2011
Is this linked to the new scheme ???

He expects a payout of around 21 months pay (£78,750.00) and 3 months pay in lieu of notice on top (£11,250).
Normally Vol Red would not attract PILON (I think) but must check the new scheme.

If he is working up to 31 March, doesn't that take care of the notice to which he is entitled?
Again linked to the new scheme - it's not ratified yet so I can't see how 3 months can be agreed yet with date (March)

Finally - sit down before you read this bit !!
Paperwork, agreements, dates etc - 20 yes 20 months ago I was being lined up for early departure as my post was axed. (I had no major snags with that) So here I am 20 months on still on gardening leave and even now no real dates ahead. All on full pay !!
Suggest a chat with the pay people may help. I am assuming from the annual pay the person is quite high in the structure (I'd guess at 1 above me) but no mention of pension ??

Hi, Yes it refers to the new scheme. I know that its not been agreed by mine & my colleagues union, but confusion reigns, the employer (NOMS) has offered an early exit scheme on the new terms with anticipated leaving date of 31st March. The closing date for applications is Monday 10th January, so as yet he has not even had an illustration of what he would get. he is aware that he could convert the sum to an immediate pension under the new terms of the CSCS.

To be honest, the whole thing with regards to cuts in civil service, numbers to go, what terms people will go on is in complete and utter confusion. :eek:

LittleVoice

tommytynan123 wrote: »

I'm a Civil Servant so I read this with interest.
If he is working up to 31 March, doesn't that take care of the notice to which he is entitled?
Again linked to the new scheme - it's not ratified yet so I can't see how 3 months can be agreed yet with date (March)

I had assumed that the 3 months' notice pay was related to the minimum statutory notice of 12 weeks for someone who has completed at least 12 years with an employer.