how long is redundancy pay tax free for

Bea787

Dear all, am trying to understand implications of tax free redundancy pay (under 30 000). My question is, is the figure tax free for the life of it, and if so, how do you demonstrate this when doing returns? Not sure how to explain it - if I pay my redundancy into a separate savings account and leave it there, is it always tax free but the interest it earns may be taxed? That's the simplest scenario. However, I'm most likely to not have a separate account for it - so if I still have the amount within my overall balance, say five years from now, whether it's from the redundancy pay or other earnings, can I always circle that figure out of my balance and not pay tax on it? Hope that makes sense? Or maybe it's only tax free in the year it is paid?
Thanks in advance

antrobus

Bea787 wrote: »

Dear all, am trying to understand implications of tax free redundancy pay (under 30 000). My question is, is the figure tax free for the life of it, and if so, how do you demonstrate this when doing returns? Not sure how to explain it - if I pay my redundancy into a separate savings account and leave it there, is it always tax free but the interest it earns may be taxed? That's the simplest scenario....

The interest it earns is taxable.

Bea787 wrote: »

... However, I'm most likely to not have a separate account for it - so if I still have the amount within my overall balance, say five years from now, whether it's from the redundancy pay or other earnings, can I always circle that figure out of my balance and not pay tax on it? Hope that makes sense? Or maybe it's only tax free in the year it is paid?
Thanks in advance

It's only tax free when paid.

Scorpio33

Its tax free when its paid to you.


ie: you receive the £30k, rather than £30k less income tax.


What you then do with it is up to you - if you used it to gain other income (such as interest), then anything earn on that will be taxed.

LittleVoice

Bea787 wrote: »

Dear all, am trying to understand implications of tax free redundancy pay (under 30 000). My question is, is the figure tax free for the life of it, and if so, how do you demonstrate this when doing returns? Not sure how to explain it - if I pay my redundancy into a separate savings account and leave it there, is it always tax free but the interest it earns may be taxed? That's the simplest scenario. However, I'm most likely to not have a separate account for it - so if I still have the amount within my overall balance, say five years from now, whether it's from the redundancy pay or other earnings, can I always circle that figure out of my balance and not pay tax on it? Hope that makes sense? Or maybe it's only tax free in the year it is paid?
Thanks in advance

When living, we don't pay tax on capital (ie the lump sum when it is received).


If you didn't spend it all immediately, you would be taxed only in relation to the income (interest/dividend) received from it or on the increase in capital if you bought and then sold, for instance, property not being your primary residence.


You don't need to ring-fence the redundancy amount when thinking of your dealings with the tax man - though you may want to do so for your own information to see how it lasts.