Some advice please

Poppie68

I hope someone can help.

I have recently finished work due to ill health, i came to an agreement with my employer to end my employment with a years pay. I have recieved the 12 months pay but they have deducted tax and NI, i didnt earn enough to pay tax and NI and the pay off is still below my tax allowance. Is this correct or is this 12 months treated differently and is subect to tax and NI.

Savvy_Sue

What date did you receive this payout?

What tax code was used?

The way tax is worked out, it's often on the basis that what you earn in one month is what you're going to earn in the remaining months of the year. You'll get some back, but I think you're going to have to reclaim from HMRC.

nomunnofun

Poppie68 wrote: »

I hope someone can help.

I have recently finished work due to ill health, i came to an agreement with my employer to end my employment with a years pay. I have recieved the 12 months pay but they have deducted tax and NI, i didnt earn enough to pay tax and NI and the pay off is still below my tax allowance. Is this correct or is this 12 months treated differently and is subect to tax and NI.

What would appear to have happened is that you have received a full years salary in the month of April which is month 1 of the tax year.

Tax - The system grants you 1/12 of your annual personal allowance each month. In your case you have received 12 months pay but have only one months allowance available to set against it. What you need to do, if you do not expect to work at all before next April, is to complete this form

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

and send it to your tax office WITH PARTS 2 AND 3 OF YOUR P45. Tick the 'I do not expect to work .... box'.

That should process the refund due.

NIC - Good news! NIC works entirely differently in that it is applied on a month by month basis without reference to any other months in the tax year. As such you will only pay 12% on any monthly earnings between £640 and £3400 and 2% thereafter. You will have saved money here but this will not be rectified.

I hope you are keeping better!

CLAPTON

how much did you receive?
when did your receive it?

Dazed_and_confused

CLAPTON wrote: »

how much did you receive?
when did your receive it?

and do you expect to have any other taxable income in the remainder of this tax year? Employment Support Allowance, pension, further (even if therapeutic) employment of any sort?

Poppie68

I recieved it today, my tax code is 810L or 944L if its changed. I earn £6276 per year so thats what i was expecting.
I am putting in a claim for ESA and dont expect to work again as i have a progressive illness which i have sruggled with for 2 years and now my body has finally given up.
Thanks everyone for your time and help.

Dazed_and_confused

Poppie68 wrote: »

I recieved it today, my tax code is 810L or 944L if its changed. I earn £6276 per year so thats what i was expecting.
I am putting in a claim for ESA and dont expect to work again as i have a progressive illness which i have sruggled with for 2 years and now my body has finally given up.
Thanks everyone for your time and help.

The claim for ESA alters things as far as claiming a tax refund goes. ESA is taxable so you should hand your P45 (keep part 1A yourself) to DWP and they will make any tax refund due at the end of the tax year or when your ESA claim ends, whichever occurs first. You may not get as much as you first thought as you need to add the ESA to your wages (figure on P45) and this might be more than your tax free allowance this year (£9440).

jimmo

Poppie68 wrote: »

i came to an agreement with my employer to end my employment with a years pay.

Do you have that agreement in writing or maybe a letter from your former employer expressing the terms of your agreement?

From what you have said the payment you received is quite likely to be a termination payment. Termination payments are not chargeable to National Insurance and the first £30,000 is exempt from tax.

As your former employer has operated PAYE then, as well as deducting tax and employees NIC from you, it has paid employers NIC on the payment so if your employer was wrong to operate PAYE it has suffered as well as you.

I would suggest you ask your former employer why it has deducted tax and National Insurance from your termination payment and tell us what they say.