Redundancy Pay

jbond

Hi, I don't know if anyone knows the answer to this or not, but exactly how is tax calculated on contractual notice pay???? My mum has received her redundancy pay, and is slightly less than it should be, so I am assuming that its been taxed, but from what I know of, she shouldn't have been taxed in the first place ???

Muppet81

Hi
I am sure someone with ore knowledge about this will reply but we are in the same position. My OH received his redundancy pay and 2 months payment in luie of notice. We were horrified to see that there was about £2k more tax taken out than we had expected.
Rang his employer and they explained that as this is early in tax year, the figure recieved makes it look like he woud earn a lot in this tax year. However, once pension kicks in next month money coming in will be less. This means that at end of tax year, he will receive a tax rebate. I suspect this is what will happen for your mum.
In theory, tax man should pick up on this at end of year and do reabte automatically but being of a suspicious nature, I will be keeping a careful eye on it.
Hope this helps and good luck to your mum in the future, especially if she is now job hunting.

princessdon

Redundancy pay isn't taxed or NI'd

Pay in Lieu of notice (unless there is a contractual clause to not do so), holiday pay etc is taxed and NI'd.

If paid before your P45 is issued this is normally the current rate of pay, if after it is normally at 20% - and then you have to pay (if any) additional tax to HMRC via self assessment.

getmore4less

PILON, even if not taxed/NI, can be paid at the net rate.

princessdon

getmore4less wrote: »

PILON, even if not taxed/NI, can be paid at the net rate.

But that is logical because it is all you would receive anyway in the main.

But how would that affect those that (depending on time of year) be able to get a tax rebate, do they just loose out because their employer had a PILON clause and paid net or does it just balance out anyway?

getmore4less

princessdon wrote: »

But that is logical because it is all you would receive anyway in the main.

But how would that affect those that (depending on time of year) be able to get a tax rebate, do they just loose out because their employer had a PILON clause and paid net or does it just balance out anyway?

I think(would need to double check)

It makes no difference to those getting less than £30k redundancy including untaxed PILON.

if getting more that £30k you are better of getting PILON gross and taxed/NId.

Between the 2 numbers it depends on exact numbers.

AN employer CAN pay PILON gross untaxed if it meets the criteria but they don't have to.

The issue might be calculating net, if you are on a cusp of tax rate with total earnings from the company. (ie, normal salary would be 40% but only 20% if in a short year)