Paid Too Much Tax on Redundancy/Final Payment

philstephen

Hello all

I was made redundant as of 30 November. Yesterday, received final month's salary, redundancy pay, payment in lieu etc. all in one lump and my P45. I noticed the tax on the final payment slip plus P45 looks too high. Here are my details:

Tax Code = 1060L I receive no benefits, tax credits etc.
Salary since April 2015 to 30 November = £18,647
Company pension contributions for above dates = £1452
In addition to the £30,000 tax free redundancy, I received a further £25,122 in payment which of course is taxable.

My final payslip shows £8412.60 tax deduced on £27,441.

Moving to my P45, YTD taxable pay = £43,770 with a tax deducted figure of £10,440. I agree with the £43K amount, but not the £10K tax amount. Entering these two figures through the tax checker on the HMRC website, it reckons I've overpaid by £3,529.

I've gone back to my previous employer (I'm currently not in employment) for them to query it with the payroll company. Can I assume it is an error and if it is, how do I get it back?

Thanks.

[Deleted User]

The tax deducted figure of £10440 is correct if you received £43770 salary by month 8 of the tax year i.e. the equivalent of £65655 per annum. (you will have entered an ANNUAL SALARY OF £43770 IN THE TAX CALCULATOR - which is not what has happened). That is how PAYE works - salary is averaged over each month and assumes that you will maintain this average over the remainder of the tax year.

What you do will be determined by your income from now until the end of the tax year. If you find another job the repayment will automatically be calculated by your new employer on the first payday after you hand in your form P45. If not, you can claim repayment from HMRC by using form P50.

https://www.gov.uk/government/publications/income-tax-claiming-tax-back-when-you-have-stopped-working-p50

jem16

philstephen wrote: »

I've gone back to my previous employer (I'm currently not in employment) for them to query it with the payroll company. Can I assume it is an error and if it is, how do I get it back?

Thanks.

Tax is worked on a cumulative basis over the whole tax year. In that one month you have had a high level of payment which will see you paying more tax. The next month would see your tax falling back as it recalculates again. The tax calculators won't help in this situation as it just looks at the whole year.

So no it's not an error and is the way the PAYE system works. When you do get a new employer make sure you hand over your P45. Over the rest of the tax year it will sort itself out. If you're going to get JSA hand your P45 to the Job Centre.

philstephen

Thank you very much to both purdyoaten2 and jem16 for your answers. Makes sense now.