Leaving work and tax payments

STAGEY

Hello - I am leaving my place of work shortly with 3 months' pay in hand on which I will be taxed. (I am being made redundant). I am already close to 40% tax bracket so suspect this might drag it above so that I do pay 40% ?? After January my only income will be my SP and I have yet to draw a small annuity of approx 1400 pa.

In Feb therefore my my total income will only be the State Pension. Given muddles that HRMC seem to make once people stop paying tax via PAYE I retire I am anxious to get this right. This is one reason I may delay drawing the annuity, small as it is, as I presume it will be taxed at source initially although no longer in paid employment. (with it my total annual income will be around £7600 so anxious not to be taxed at all)

How can I try to ensure that everything tax wise will go smoothly.

thanks for any advice.

Savvy_Sue

You know £30,000 of your redundancy is normally tax free? does that help?

STAGEY

Yes I do thank you. It's just the tax implication re the 3 months' pay in lieu and possible tax issues following that.

[Deleted User]

Given that you will have an income (state pension) you will have to wait until the end of the tax year and write to HMRC to request a review of your tax liability for 2015/16. You can also detail your income for 2016/17 onwards and thereby ensure that no tax is taken from the annuity.

Also it does not, to me, make sense to defer your annuity because basic rate tax may be taken from it. You can include it in the review and, in any case, is it not better to have 80% of something than 0% of it?

STAGEY

Thanks yes I can see your point. I think I will just have to contact (!) sigh - and sort it out with them in a few months' time. regards

jimmo

[Deleted User] wrote:

Given that you will have an income (state pension) you will have to wait until the end of the tax year

HMRC don't seem to agree with you. In fact they suggest that the OP should ring them sooner rather than later though it's probably sensible to wait for the P45.
https://www.gov.uk/claim-tax-refund/youve-stopped-work

[Deleted User]

jimmo wrote: »

HMRC don't seem to agree with you. In fact they suggest that the OP should ring them sooner rather than later though it's probably sensible to wait for the P45.
https://www.gov.uk/claim-tax-refund/youve-stopped-work

I take your point - obviously incomes are linked in a way they never used to be.

However, I decided to fill in the P50 with duff info - absolutely nowhere does it ask you about the annuity income and so, even if you got the P50 refund, you will still require to claim the tax back on that if you, for example, earned under the personal allowance for the year. Obviously that is not the case with the op but nevertheless .......