Making the most of redundancy sum

Liffy99

Hi
I'm about to be made redundant from the NHS with a gross lump sum payment of about £110k.
I know the first £30k will be tax free but how do I minimise tax on the remainder ? The payment is to be made early in the 2017/18 tax year (probably May).
At the moment I am a 40% tax payer but, once redundant, my only possible income source (unless I seek another job) will be my modest NHS pension of approx £15k / annum.
Does this mean the taxable element of the redundancy lump sum (110-30 = 80) would be taxed at 20%, 40% or a combination of several factors.
For example;
Income for 2017/18 year may equal
£5k salary for April
£13k NHS pension for rest of tax year
£80k redundancy balance
TOTAL £98k

Tax free personal allowance of £11500
20% tax on next £33.5k = £6.7k
40% tax on remainder (98-11.5 - 33.5 = 53k) = £21.2k

Or do I have this all wrong ?

I understand I may be able to contribute to my non NHS pension scheme - I realise I am limited to a £40k gross contribution but does all of this in-year income (pension + redundancy + salary) count as income for that purpose ?

Answers on a postcard welcome . . . .
Thanks

getmore4less

20% tax on next £45k

next £33,500

getmore4less

Could you not defer your pension?

Liffy99

As far as I know, I can certainly defer taking my pension as as long as I want. However it's annual value would not change, so I would simply lose the annual amount for each year deferred. So I may as well take it, even if I effectively pay 40% tax in year one on it.

Given that tax deducted from my normal salary is at a mix or rates up to 40% (i.e. the tax is taken on the expectation I work a full year) would I have to reclaim from HMRC if total earnings for the year did not reach the £45k threshold ? then again the 'income' from the redundancy would presumably remove this option anyway.

The only other thing I can think of is to put some of the redundancy payment into my non NHS pension and get back 20% (or maybe even 40% ?).

Golly, whoever dreamt up all these rules . . . .

Dazed_and_confused

From your original post you are clearly going to be paying a lot of 40% tax in the 2017:18 tax year so pension contributions would be tax efficient as you could receive quite a bit of higher rate tax relief.

You are probably best starting a thread on the MSE pensions board for help with best options but in simple terms you can end up with a pension pot way in excess of what you put in.

Say for example you invest £8000 and the pension company claim basic rate tax relief from HMRC so you have £10000 in your pension. You can then claim higher rate tax relief from HMRC and you get a £2000 tax refund (or £2000 reduction in any tax you have to pay) so the £10000 in your pension fund has actually only cost you £6000.