How much National Insurance do I pay on my lump sum?

HarpoonJoe

Hi,

I understand that the first £30k is tax free and that the rest is taxed as usual. Am I right that NI is calculated on the taxable amount as normal too?

For example, Assuming I would receive a £65k lump sum on 6th April £30k would be tax and NI free leaving £35k which would be taxable. According to this link http://www.listentotaxman.com/35000 I would be due to pay £5000 tax and £3245.28 in National Insurance

Have I worked this out right or is there an exemption on NI on redundancy?

Regards
P

Carl31

No exception for the excess. Depending on when you start a new job you may have personal allowances left

getmore4less

No NI on compensation payments just the tax.

If in the new tax year you may find the initial tax much higher than expected as it is not calculated on the annual basis.

Look at P50.

HarpoonJoe

Thanks for the replies. With two that seem to contradict each other can someone point me to a reliable resource that confirms the situation either way? I've googled and googled but I get conflicting information which isn't helping.

General_Grant

HarpoonJoe wrote: »

Thanks for the replies. With two that seem to contradict each other can someone point me to a reliable resource that confirms the situation either way? I've googled and googled but I get conflicting information which isn't helping.

Did you look at http://www.moneysavingexpert.com/family/redundancy-help where it is stated that redundancy pay is subject to tax (over the £30K inc value of perks like cars) but not NI.

If you look at redundancy pay on https://www.gov.uk/redundant-your-rights/redundancy-pay you will see reference to tax but NI is mentioned only in relation to wages and holiday pay.

HarpoonJoe

Thanks for the links. I had read those but I find them to be somewhat ambiguous at best.

The Moneysavingexpert link only talks about the first £30k and makes no reference to NI for anything above this.

"Whether it's statutory (see above) or contractual redundancy pay, the first £30,000 you receive is tax free, and no national insurance contributions are deducted either. "

The gov.uk site says that NI will be paid on wages or holiday pay owed (which is confirmed elsewhere). The page makes no reference to payment over £30k

"Your employer will deduct tax and National Insurance contributions from any wages or holiday pay they owe you."

So neither links give any concrete information on what exactly happens to anything over the £30k threshold. Some sites say NI payment is due while others say it is due.

There's clearly a lot of misinformation out there.

chrisbur

Have a look at
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/403867/CWG2__2015_.pdf

Page 76 item 6

HarpoonJoe

Thank you, that's brilliant