Redundancy payment and pension

gyromain

I am being made redundant on March 31st 2014 but the redundancy will not be paid until after the 5th April 2014. Even after the tax free £30000 there is still over £50000 tax to pay @ 40%. Next tax year I will have very little income to claim pension tax relief against.

Do I cash in all my ISAs, borrow from parents, borrow as much as I can to pay into a pension before the 5th April and then pay everyone back in a few weeks time when I receive the redundancy payment?

Gyromain

bigadaj

Couldn't say without more details of your income.

It's possible that borrowing now voids be advantageous, my observation would be that if you are going from a very high to a very low income then you woud,nt necessarily be paying 40% tax next year? So much of the tax due on the payment would be paid at a lower rate.

gyromain

13-14
taxable income £25000
redundancy (taxable £90000)
redundancy (not taxable £30000)

14-15
taxable income £5000

enator

Have a look here for some suggestions;


http://www.ifaonline.co.uk/ifaonline/feature/2234776/i-m-afraid-we-have-to-let-you-go

bigadaj

But presumably the redundancy payment will be paid in 2014/15 tax year and so can be offset against pension contributions for that year. If that is the case then £40k could go into a pension with 40% tax relief! leaving a relatively small amount to be taxed at a higher rate.

gyromain

I have been told by my accountant that it is the date on the redundancy agreement that determines the tax point - in this case 31st March tax year 2013/14.

bigadaj

gyromain wrote: »

I have been told by my accountant that it is the date on the redundancy agreement that determines the tax point - in this case 31st March tax year 2013/14.

In which case I think I'd ask his advice rather than a bunch of random people on no Internet forum.

kidmugsy

bigadaj wrote: »

In which case I think I'd ask his advice rather than a bunch of random people on no Internet forum.

Oi, speak for yourself. I am not random, I am haphazard.

xylophone

http://www.hmrc.gov.uk/guidance/redundancy-factsheet.pdf might be worth a look?

gyromain

Would you borrow money for maximum of 6 weeks in order to save 40% or 45% tax?

enator

Yes, it's a no-brainer in your case.


Did you check the links in my other mail? You could ask your employer to put it into your company pension scheme (if you are a member).