Redundant with final retention bonus, how much tax can I expect?

Phunky

Hi guys,

I'm being made redundant on December 31st and as part of my severance package I will be given the final part of a retention bonus from a previous acquisition.

I'm already in the 40% tax bracket and will be getting around £31k after exchanging to pounds (payment is in dollars) and I currently don't plan to go back to work in the new year so I don't be earning anything else for the rest of this tax year.

Should I just add the bonus on to my salary and calculate 40% from that or is their another way of calculating this?

Many thanks

BoGoF

Your employer should use code 0T for this payment which means a portion will be charged at 50%

Phunky

How much should I expect to be charged at 50%?

AirlieBird

BoGoF wrote: »

Your employer should use code 0T for this payment

Why? Code 0T should only be used if payment is made after the P45 has been issued.

BoGoF

AirlieBird wrote: »

Why? Code 0T should only be used if payment is made after the P45 has been issued.

Sorry, for some reason I read the OP as made redundant 31 December last year.

If the severance package is paid with your final salary then it will be taxed using your normal tax code. Could still take you into 50% tax bracket at month 9 depending on your total taxable pay as of 31/12/11

Phunky

BoGoF wrote: »

Sorry, for some reason I read the OP as made redundant 31 December last year.

If the severance package is paid with your final salary then it will be taxed using your normal tax code. Could still take you into 50% tax bracket at month 9 depending on your total taxable pay as of 31/12/11

Will certainly be in the higher tax bracket as current salary and other retention payments have already took me above £50k this year.

getmore4less

Any of the payment redundancy first £30k of that will be tax free.

retenton probably subject to NI.


If not planning to work do a P50 that will sort out the overpaid tax.

ceeforcat

Phunky wrote: »

Will certainly be in the higher tax bracket as current salary and other retention payments have already took me above £50k this year.

In that case you will be well short of the rate above which 50% tax applies - currently £157475 or about £118000 at month 9.

Phunky

getmore4less wrote: »

Any of the payment redundancy first £30k of that will be tax free.

retenton probably subject to NI.

From what HR have told me the redundancy will be tax free but my retention won't be which was expected.

ceeforcat wrote: »

In that case you will be well short of the rate above which 50% tax applies - currently £157475 or about £118000 at month 9.

I will be well under that my annual salary is £55k and the retention is worth about £30k depending on conversion rate.

getmore4less wrote: »

If not planning to work do a P50 that will sort out the overpaid tax.

Thanks, I plan on taking off the first 3 months of next year and then will be setting up on my own. Will a P50 secure my NI or will I still need to register as unemployed/sole trader for that?

Many thanks for the replies.

Mikeyorks

Phunky wrote: »

Will a P50 secure my NI or will I still need to register as unemployed/sole trader for that?

The P50 :

http://www.hmrc.gov.uk/pdfs/p50.pdf

......... purely acts to get you an incremental in year refund as your personal allowance (allocated monthly) creates an overpayment. If you're registering as unemployed until the new tax year - any refund will be d/w via DWP and the P50 won't apply.

AirlieBird

ceeforcat wrote: »

In that case you will be well short of the rate above which 50% tax applies - currently £157475 or about £118000 at month 9.

The 50% rate applies on taxable income above £150k. No personal allowance as that was tapered away at £100k.