Reducing Tax on Redundancy

Haberdasher

I am being made redundant in the summer and want to try and reduce my tax bill. I earn £53k but make monthly pension contributions of £755. With other pre tax deductions it takes my pre tax pay down to £42,300. With the tax free allowance my pay is reduced below the 40% rate. Will this mean that any redundancy pay over the £30k tax free limit will be taxed at 20% or will it be 40%?

Any advice is gratefully received. I have worked there for 24 years.

Thx Rita

CLAPTON

the redundancy payment above 30k is 'added ' to your income and taxed accordingly as if it were salary
how much do you expect your income to be next tax year excluding the redundancy payment

Haberdasher

Hi Clapton,

my pretax pay up to my leaving will be £14,200. The amount of redundancy pay over the limit is £9600.

I will unemployed after that so can't anticipate any future pay.

Thanks

CLAPTON

your employer will deduct tax from the 9600 which may be too much.. it depends upon how much you earn in that tax year

Haberdasher

If they deduct too much tax, even though my total income wouldn't have exceeded the upper threshold by then; will I have to wait until the end of the tax year to claim the difference back?

CLAPTON

it depends
maybe your employer will pay the redundancy before you leave and include it on the P45 or maybe they will make an seperate payment
then it depends upon whether you get a new job, apply for JSA or just retire

Haberdasher

Many thx Clapton. I will approach my payroll section to get a bit more info, and hope I can claim anything overpaid in this tax year