JSA and 40% tax threshold

Swipe

I'm due to be made redundant at the end of the month and my severance pay, combined with my salary earn't so far this tax year will take me over the 40% tax threshold. I understand that contribution based JSA is classed as taxable income. Does this mean I would only receive 60% of my £67.50 if I decided to sign on to get my national insurance stamp paid whilst I looked for another job?

lizzywig

I've just gone on materity leave and spoke to the tax office a couple of weeks ago because I knew I would be getting a large lump sum of money and was worried about how I would be taxed because it would push me into the next threshold. As it happens it didn't but maternity and redunancy are different. What they did tell me is that you can earn £622/month tax free. I would suggest calling the tax office, give them your info and let them figure it out for you. Have your latest pay slip at the ready and give the details of your severence pay too.

mildred1978

Swipe wrote: »

I'm due to be made redundant at the end of the month and my severance pay, combined with my salary earn't so far this tax year will take me over the 40% tax threshold. I understand that contribution based JSA is classed as taxable income. Does this mean I would only receive 60% of my £67.50 if I decided to sign on to get my national insurance stamp paid whilst I looked for another job?

Depending on how the severance pay is worded, the first £30k is tax free, so this might not be an issue.

Can you give some rough figures?

Tax code
Severance package (PILON, lump sum etc)
Annual salary

chrisbur

Swipe wrote: »

I'm due to be made redundant at the end of the month and my severance pay, combined with my salary earn't so far this tax year will take me over the 40% tax threshold. I understand that contribution based JSA is classed as taxable income. Does this mean I would only receive 60% of my £67.50 if I decided to sign on to get my national insurance stamp paid whilst I looked for another job?

No this is not the case. Your tax position will not be looked at untill either the tax year end or when your jobseekers ends. Then you will get back some of the 40% tax you have paid rather than pay any as you will not have used your 20% tax allowance nor all of your tax free allowance, during the time you were recieving jobseekers ( assuming you do not have another very high source of taxable income)

HappyMJ

Swipe wrote: »

I'm due to be made redundant at the end of the month and my severance pay, combined with my salary earn't so far this tax year will take me over the 40% tax threshold. I understand that contribution based JSA is classed as taxable income. Does this mean I would only receive 60% of my £67.50 if I decided to sign on to get my national insurance stamp paid whilst I looked for another job?

You would still have some tax free allowance to use up. Your employer would have given you a month of it at a time. You will find you will get quite a refund back after April next year so keep all your records and claim it back.

Quick calc. Personal allowance £7,475 = £143.75 per week. You'll get £67.50 per week JSA so will be able to claim back an extra £30.50 for every week you are not working in April. That's about 22 weeks away so you should get a refund of £670.

Swipe

mildred1978 wrote: »

Depending on how the severance pay is worded, the first £30k is tax free, so this might not be an issue.

Can you give some rough figures?

Tax code
Severance package (PILON, lump sum etc)
Annual salary

I don't feel comfortable giving those figures on an internet forum but I can confirm that my gross salary earn't so far this tax year + the remainder of my serverance pay over £30k pushes me into the 40% tax threshold. In otherwords, if I got an minimum wage job I would be liable to pay 40% tax until the end of the current tax year. So my question is would the £67.50 per week be taxed at 40%? I assume this will be the case.

chrisbur

Swipe wrote: »

I don't feel comfortable giving those figures on an internet forum but I can confirm that my gross salary earn't so far this tax year + the remainder of my serverance pay over £30k pushes me into the 40% tax threshold. In otherwords, if I got an minimum wage job I would be liable to pay 40% tax until the end of the current tax year. So my question is would the £67.50 per week be taxed at 40%? I assume this will be the case.

I am afraid that you do not understand how PAYE is operated. You have an allowance which is tax free and an allowance which is liable to tax at 20% then you pay tax at 40% and so on if you get to 50%. But you have not had all of these allowances, if you finish at the end of November even assuming that you do not get your final payment untill December then you will only have had 9/12 of your tax free allowance and 9/12 of your 20% allowance you will still have 3/12 of your tax free allowance and 3/12 of your 20% allowance to use against your wages or jobseekers. Without figures I cannot give you any idea of what your tax position will be but assuming that you only get the £67.50 jobseekers each week then you will proberbly have some of your tax free allowance and 20% allowance not used by your jobseekers payments so this will reduce the tax due on your earnings and should give you a tax rebate at the year end.

If you took a job on minimum wage then again this would not be taxed at 40% as you would have your unused tax allowance to set againt it and again your unused 20% allowance so would proberbly be paying very little tax or even getting a small tax rebate untill the tax year end.

mildred1978

They will tax your severance payment as if that is what you earn every month, so you'll pay a LOT of tax on that. You'll then use the remainder of your tax code on the rest of the year (so JSA if claiming) and at the end of the tax year you'll probably be due a big refund.

I've done the same this summer, but didn't bother with JSA (not earning for rest of year either) and have just had over £12k back from HMRC.

Swipe

mildred1978 wrote: »

They will tax your severance payment as if that is what you earn every month, so you'll pay a LOT of tax on that. You'll then use the remainder of your tax code on the rest of the year (so JSA if claiming) and at the end of the tax year you'll probably be due a big refund.

I've done the same this summer, but didn't bother with JSA (not earning for rest of year either) and have just had over £12k back from HMRC.

Thanks. In that case, I won't bother claiming JSA, I'll wait 4 weeks and claim my tax back. It's probably not worth my while working until the next tax year anyway.

mildred1978

Swipe wrote: »

Thanks. In that case, I won't bother claiming JSA, I'll wait 4 weeks and claim my tax back. It's probably not worth my while working until the next tax year anyway.

It took quite a while to get it back (I posted a thread). Claim went in on 15th August and the money cleared my account on 31st October.