Too much tax applied to redundancy pay?

RavingMad

Hi

Hoping someone might be able to work out if the right tax has been taken off my redundancy pay that I received at the end of last month

Of the £26,850 payment, £17,500 is tax free (statatory redundancy). Of the £9,350 that is taxable (pilon), I paid £2,875 tax

Gross pay to date is £35,300

Tax code is 1035L M1

Thanks

Dazed_and_confused

Does seem too high for £9350.

I get £2861 however what happened with that payment is really irrelevant as tax ultimately is calculated on an annual basis so what gets deducted is just a contribution towards your tax bill for the year.

Your tax code for that payment was used on an emergency basis (the M1 bit) so if you have received other payments in February you could owe a lot of tax, if you haven't and don't receive any more income before 6 April 2017 you may have paid too much but impossible to say without knowing details of all of your income for the year, the tax paid and why your code is 1035L.

RavingMad

I thought I should be taxed near to £2k?

Gross pay to date - £35,300
Tax to date - £6,325

If I put those figures in listentotaxman, I should only be paying approx £5k tax (£4.5K when I include 8% pension I pay)

Dazed_and_confused

You appear to have ignored an important element of your tax code - your employer is operating this on an emergency basis (M1) so they do not take into account what has happened earlier in the year.

If your tax code was higher earlier in the year it would be normal for it to be put on an emergency basis when lowered (avoids a lot of tax in one month) but does occasionally cause other issues like the one you have encountered.

If you have a new job and expect to be paid at the end of March you could ask HMRC to issue a code with all your previous year income to your new employer and they will adjust the tax (including making any refund due) when they pay you at the end of March.

booksurr

did you get a P45 which includes the redundancy figures or not?

where an employer makes someone redundant but gives them their final pay and P45 before then giving them their redundancy (on a separate payment obviously), the employer is required to use a M1 tax code on the redundancy payment.

chrisbur

booksurr wrote: »

did you get a P45 which includes the redundancy figures or not?

where an employer makes someone redundant but gives them their final pay and P45 before then giving them their redundancy (on a separate payment obviously), the employer is required to use a M1 tax code on the redundancy payment.

As well as putting on month 1 basis the employer should also amend the tax code to 0T so unlikely to apply here.