Redundancy on Maternity Leave

c1403

Hello

My employers have written to me advising that I have been potentially selected for redundany, I amdue to return in Feb from my OML.

A alternative position has been offered but it's at 40% pay drop (though it's pretty much the same job)

I've worked there 9 years and am 27, I've worked out that I'd be entitled to £3010 statutory redundancy pay which is tax free.

My contract allows for payment in lieu of notice and I work out I'll be entitled to 9 weeks paid notice that which is around 6,500, will this be taxable and if so would I be taxed at the higher tax rate when this is added to my redundancy pay for that month?

I am happy to take the redundancy but I wanted to walk away with as much as possible, considering i am on maternity and am being made redundant, paying tons of tax would be horrible.


Apologies for any typos I blame my new tablet

Thanks

mariefab

You shouldn't pay tax or NICs on the redundancy pay element of the package unless it's over £30,000.
However, you should expect to pay tax/NICs on the PILON (because it's allowed for in your contract) and also on your accrued untaken holiday pay.

c1403

Thanks this is what I gathered.

I am not a higher rate taxpayer but the PILON and annual leave payment will be around £7500 so would that be at the higher tax rate as I'd imagine it would be paid in one monthly sum? I would claim the tax back eventually but would help my cashflow right now if I didn't loose 40% of this payment.

Thank You

getmore4less

Not all of it would be 40% as we are well into the tax year and you will probably save some NI from the equivilat paid normaly

wit ha base around £37k there is still a bit of room to stay under 40% for the year unles you get another job.

keithrgj

you should not be paying tax/ni on PILON if it is part of the redundancy process and is kept below £30000.00

expect to pay tax on any outstanding holiday entitlement or bonus payments though

getmore4less

keithrgj wrote: »

you should not be paying tax/ni on PILON if it is part of the redundancy process and is kept below £30000.00

expect to pay tax on any outstanding holiday entitlement or bonus payments though

contractual PILON is taxable/NI.

Sycorax

Based on what you've said it's unlikely that your pay, including notice pay/holidays etc would flip you into the 40% tax bracket, unless you've also received bonus payments.
If you're on MAT leave I guess you wont have been paid your full salary for the year anyway, unless you've only just gone onto it.

You need to calculate everything you've been paid thus far this year, add on your notice pay (which will include accrued holidays and employers pension contributions) exclude the reducnacy element and see where that brings you out.

Your pay slip will tell you your total pay to date and well as tax paid to date.

You wouldn't pay 40% on the total amount, only the difference between £34, 370 (this is after your personal allowance) and whatever you end up earning in the tax year.

I'm guessing (without seeing the figures) that once you factor in your personal allowance and any reduced pay as a result of MAT leave, you should be under the wire for 40% tax.