Which tax year?

Nual

Please will someone help with this?

1. I took redundancy and my final day was 5/4/16 ie last day of the financial year. I received a redundancy payment and pay for the few days in April. The redundancy over 30k and the pay was taxed at the 40% rate, and on my payslip is referred to as taxable pay. Because of the amount I was putting into my pension, my taxable earnings in 15/16 would have been under the 40% rate even including the taxable redundancy amount.

I queried this with payroll and they checked on a HMRC calculator and said this was correct but they couldn't understand why. My coding on this last payslip was 1098L ie the 16/17 tax free allowance.

I queried this with HMRC and they said it was correctly taxed at 40% as the assumption is that I would earn a similar amount each month for 16/17. I would have my tax adjusted during the year if this wasn't the case.

What I cant understand is why this is being classed as income for 16/17 when it relates to 15/16?

Assuming this is correct, does this mean that I can put the equivalent of this taxed income into a SIPP in 16/17 ?

Also does this count as taxable income for 16/17 in relation to the 17k income allowance where income from savings interest and pension is tax free up to 17k?

2. I am able to buy a bit of extra main pension by completing an added years contract. I am waiting for the pension section to inform me how much this will cost. If say the figure is 10k, do I pay this with tax deducted ie 8k or pay 10k and then reclaim the tax from HMRC?

Thanks for any help and sorry it is so complicated.

Dazed_and_confused

PAYE tax is normally based on when the payment is made and this key bit of detail is missing from your post

It sounds like the payment was probably made after 05/04 so falling into 2016/17 tax year?

'1098L ie the 16/17 tax free allowance' This doesn't make sense as tax codes aren't just based on the tax free allowance and 1098L could be someones code for either 15/16 or 16/17 (or any other year for that matter)

polymaff

Nual wrote: »

.... for 16/17 in relation to the 17k income allowance where income from savings interest and pension is tax free up to 17k?

You're in the majority in believing this to be so. It isn't.

You'll pay some tax on any non-Savings Taxable Income (e.g. earnings, pension) over your Personal Allowance.

Nual

Thanks polymaff. I didnt word that well, just that my tax code relates to my tax free allowance. Yes it was paid mid April.

I know I have to pay tax on my pension but isnt the amount above pension up to 17k tax free if it is interest?

polymaff

Nual wrote: »

Thanks polymaff. I didnt word that well, just that my tax code relates to my tax free allowance. Yes it was paid mid April.

I know I have to pay tax on my pension but isnt the amount above pension up to 17k tax free if it is interest?

It's taxed at 0% rather than tax-free - and there is an important difference - but, yes.

The government have been really bad about giving clear advice on this year's more complicated tax regime.

xylophone

https://forums.moneysavingexpert.com/discussion/5437428

See post 7.

jimmo

My understanding is that if your last day of service was 5 April you actually became redundant on 6 April. Employment law, not tax law, then dictates that in the absence of any formal agreement to the contrary you become entitled to your redundancy package on the day of redundancy, not the last day of service.
That, in turn, makes the redundancy payment a payment after leaving and subject to separate PAYE procedures to normal pay.
I am not up to date on current PAYE procedures but nowadays there is significant danger that people in your situation will be excessively taxed on their redundancy pay and this appears to be the case for you.
There are quite a number of regular posters on here who are much better than me on PAYE procedures but if you want to know whether the amounts deducted by your former employer were correct they really will need details of the pay and tax deducted from your final payslip and similarly for the redundancy payment.
However both your final pay and your redundancy are chargeable to tax in 2016/17 and how you go about getting back any excessive deductions depends on what you do work wise from now on.
All HMRC can effectively do during the current tax year is adjust your PAYE coding (not the code number but the ongoing pay and tax details). You will need to ask them to do that.
If you have an ongoing source of PAYE income such as a pension or new employment the application of the revised coding details will get the overpaid tax repaid. Without details of the amounts involved its not possible to say whether you will get the lot on your next payday or it will be spread through the year.
If you’re claiming the dole you will get nothing for the time being but should be repaid by DWP when you sign off or at the end of the tax year.
If you’re unemployed but not claiming benefits you can claim an unemployment repayment from HMRC once you have been unemployed for more than 4 weeks using form P50.
https://www.gov.uk/government/publications/income-tax-claiming-tax-back-when-you-have-stopped-working-p50

Nual

Thanks to jimmo and xylophone