Redundancy and Lump sum pension

binnie

Hi, My husband is thinking of taking voluntary redundancy roundabout October time and has worked there for 37 years.
he will be 53 in August.
He currently earns about £41,000 a year and can take a lump sum in pension of around £51,000 which is tax free and a yearly pension of about £8,500.
he also will get a redundancy package of about £43,000 where the first £30,000 isn't taxable.
Will the inland revenue calculate the tax on what he has earned for the year along with the so called tax free pension lump sum and the £43,000 redundancy package, or will they do it as the pension lump sum being tax free and not putting that into the equation
we are confused by it all.

He gets paid weekly and his pension will be paid weekly.

Will he be entitled to a tax refund after the year ends next April.

getmore4less

there may be options with this.

check the pension for reduction claiming early

total income for tax year

jsa for 6 months/get a job/take pension.

topping up pension.

getmore4less

forgot pension lump sums do not get taxed.

binnie

Hi, By the time he retires which will be in October, he would have earned about £20,000 ish to which he pays tax on every week as he gets paid weekly.
Where he works, they can claim a pension at 50 and we have decided to take the lump sum and a reduced weekly/annual pension.
We are buying a property in Spain so wanted the money now rather than take a large annual pension.
He won't be working again

Thanks for your help

getmore4less

what are they doing with the 12 weeks(min) notice and accrued untaken holiday.

Have you checked the commutation rates for the lump sum against the pension and borrowing the money against the extra pension

what's the benefit of delaying pension a bit before taking it.


Forget how often you get paid it makes little difference

It is the totals for the tax year that matters
41k annual

Oct redundancy 6-7 months £20,500-£23.900 - £4.250k-£3500 pension + £13k extra redundancy

So under the 40% threshold for the year however you cut it.

binnie

Well at the moment he has only just put in for his figures even though he has a rough idea of them as he calculated on the works intranet.
I don't think his works will let him go until October anyway.

Not sure about the accrued holiday pay, he might just take the days off beforehand.

Have you checked the commutation rates for the lump sum against the pension and borrowing the money against the extra pension . Not sure what that means sorry.

We don't want to delay the pension as we need it to buy the property along with his redundancy pay and the rest we will live off for a while.

binnie

I thought the 40% threshold was £31,866?

Wilkins

binnie wrote: »

Will the inland revenue calculate the tax on what he has earned for the year along with the so called tax free pension lump sum and the £43,000 redundancy package, or will they do it as the pension lump sum being tax free and not putting that into the equation
we are confused by it all.

Be prepared for the fact that HMRC might tax the excess £13,000 of the redundancy at 40% on the assumption that there will be more earnings for the rest of the tax year. If so, you may need to claim a refund the following tax year.

binnie

Thanks Wilkins, that's what i thought.
So say he had earned £20,000 from now until October when he gets to leave and then gets his redundancy money. I presume you group that together, (well the amount after the £30,000) and pay the tax of 40% ?
Or will the Inland revenue make a presumption that he is still earning the £41,000 until the end of the tax year and then refund him?
it's all complicated.
Do you think I should ring them, well hubbie ring them.
Will they be able to estimate how much we get.

Wilkins

There is no need to ring them in advance --they will do what they will do-- although it won't do any harm, I suppose. They are likely to tax at 40% because they don't know that your husband won't walk into another job and it may just be standard HMRC policy anyway.


If it happens (and it may not), then you can claim back the following year (as I did) or contact them then. You will get the money back (£2600), it's just a matter of when.

binnie

Ah well £2,600 isn't as bad as I thought. Would be nice to get some back though :beer:
Thanks again for your help.