Redundancy --Tax/NI Liability question

benny5

Help please.

Can anyone advise on the tax and NI liability on severance pay of £50k. I believe there is an initial tax fee sum of circa £30k but am unsure about the remainder, also, the NI liability.

I am currently a standard rate tax payer.

Thanks.

'Heading for the dole queue' Benny

lopbri

Yes the first £30000 is tax free,the rest is a your normal tax rate,no NI is payable,the only way round the tax,is to put all or part of the redundacy into your pension plan, i know as this is the advice i have been given ,as i to may be about to be liberated from my job.

benny5

Thanks for the info, and sorry that you are in the same unfortunate situation.

I will have to contact my pension providers to investigate the 'addition pension contribution' options.

Regards


Benny.

Cook_County

Benny - You may well want to think about taking legal advice that this payment qualifies for the £30,000 exemption, because these are frequently challenged by HMRC.

I assume you have had no overseas service with the employer that could boost the £30,000?

benny5

All UK service earnings.

This possible challenge to the £30K is an additional worry.


Benny.

Debt_Free_Chick

benny5 wrote: »

All UK service earnings.

This possible challenge to the £30K is an additional worry.


Benny.

A genuine payment of compensation for loss of office is unlikely to cause a problem. However, the challenge is usually on the grounds that some of the compensation is actually a contractual payment in lieu of notice, which is taxable in the same way as normal salary. All of this depends on the wording in your contract of employment and, if applicable, the compromise agreement.

Any decent employer will be well aware of this and structure the payment(s) accordingly. When you have the formal offer from your employer, I guess you have a chance to meet with HR to discuss it - they should be able to give you some information, but are unlikely to give you "advice".

If it's a compromise agreement, presumably part of the settlement includes a payment from your employer to fund advice from a solitor, though.

benny5

I appreciate your info, I feel a little more relaxed about things now that you have expanded on the conditions associated with the the £30K.