Over Taxed on Redundancy Payment?

BijouDrains

My partner was made redundant on March 5th. She has just been paid monies owed, but I am puzzled about the tax she has paid and the tax code on her final pay slip.
She has been paid the following:
Notice Entitlement: £900.00
Holiday Pay: £140.00
Redundancy Entitlement: £1350.00

The Gross Taxable Amount is given as £1040.00, but £281.38 tax has been deducted, which means her Tax Allowance has not been taken into consideration.

Oddly, her tax code is given as OT W1 instead of 647L

Anyone any idea why so much tax has been paid?

Thank you.

AirlieBird

If payment is made after the P45 has been issued then the tax code to be applied is 0T. As you've worked out, this tax code means that tax is deducted without any personal allowance.

If your partner's tax code in her new job has W1 or M1 after it, then that means that tax is deducted without reference to any earnings or tax paid in other weeks/months and she will need to make a repayment claim after the end of the tax year.

priorslee

I'm in a similar position and queried this with payroll dept. They advised (and I have since verified this online) that HMRC changed the rules in April and all payments made after leaving (eg redundancy payments have to be taxed on the '0T W1' or '0T M1' basis.

What this means is that you get no personal allowance and the whole payment is treated as though it is a payment in week 1 for your case. The effect of this is that tax has been deducted at the higher rates.

In my case this amounts to several £000 so I was furious when I found out.

The better news is that the overpaid tax can be reclaimed by filling in a P50 form and sending it off to your tax office - have a look at:
http://www.hmrc.gov.uk/incometax/stop-work-refund.htm

getmore4less

If you get another job or claim JSA you can't use the P50

so read the instructions carefully

pleasedelete

Very hard to use p50.

I have overpaid £2700 in tax with a payment made in April which was taxed on a w1 at 40 per cent.

They said either I had to have no income for at least a month and then claim. Get a job and get it back over remainder of the year through PAYE. Wait until next April and claim it through a return.

Annoying.

jazza6

This is confusing. I've just been made redundant but HR told me my redundancy money wouldn't be taxed!!

getmore4less

jazza6 wrote: »

This is confusing. I've just been made redundant but HR told me my redundancy money wouldn't be taxed!!

Up to £30k but other payments like holidays or outstanding pay will get taxed.

jazza6

getmore4less wrote: »

Up to £30k but other payments like holidays or outstanding pay will get taxed.

Thanks for that, puts my mind at ease. I am only due around £2142 in redundancy. I know my last salary will be subject to tax and N.I. so I don't mind that.