Redundancy Payments

ravenk

Where I work they pay a generous pay off package in the event of redundancy.
Thus if I was to be selected I would be paid £48,000 approx.
So I presume the following :-
£30,000 would be tax free and the remaining £18,000 would be liable to 40% TAX and NI.
Thus would my final salary payment (monthly) be
My Net Salary + 30,000 + what's left of the £18,000 minus tax or
My Net Salary + What's left of the £48,000 minus tax.
I then claim back the tax I paid on the £30,000 that should have been tax free ?

Thanks for any reply in advance.

00ec25

ravenk wrote: »

Thus would my final salary payment (monthly) be
My Net Salary + 30,000 + what's left of the £18,000 minus tax or
My Net Salary + What's left of the £48,000 minus tax.

My Net Salary + 30,000 + what's left of the £18,000 minus tax at the relevant marginal rate

ravenk

So if one pays tax at 40% due to earnings , I would expect to pay tax on the £18K in excess of the £30K tax free at 40% I presume ?
(plus any NI ...2% I think).

humphrd

It would depend on how they process your payroll but generally I would expect 3 lines on your final salary:

1)Your months pay, any holiday due (or due to them if you have taken too much) and that will be taxed and NI at whatever your tax coding is.
2) Your £30k tax free redundancy payment
3) Your £18k taxed and NI at whatever your tax coding is.

Hope that helps !

dori2o

It all depends how, and more importantly when they pay your redundancy.

If it is paid with your final salary, then the taxable element will be taxed as normal, and included on your P45.

However, it is possible your employer will pay the redundancy seperate from your final salary and after the P45 has been issued.

in this case the taxable element of the redundancy would be taxed using a tax code of 0T on a month 1 basis.

Therefore, if this is how they pay it, on £18k you would pay about £7175 tax and £640 NI. No P45 would be issued for this payment.

You would be able to claim any overpayment of tax after the end of the tax year.

Suewre

As long as the £48,000 is all redundancy as defined by HMRC, then no national insurance contributions are due on any of the £48,000 and tax is due on the amount over £30,000.

ravenk

Thanks for the replied everyone.
That clears up a few questions I had on the process.

This is what makes this forum great.
Quick unbiased help.

Cook_County

In addition to the £30,000 you might have foreign service relief.

You may also want the £18,000 to be sacrificed into a pension plan.