Has too much tax been deducted from my redundancy payment?

Camster

I've recently taken voluntary redundancy and received a redundancy payment which was more than the £30,000 tax free limit. I won't be working again, and am taking my works pension a little earlier (I'm 58), so I will be a basic rate taxpayer.

My understanding was that I would need to pay 20% tax on the amount I have received above the £30,000 threshold and that this was not subject to National Insurance.

I've just received my payment in May from my employer, and they have calculated my tax due based on 1/12th of my annual tax free allowance, which means that part of the payment above the £30,000 tax free threshold has been taxed at 40%. I think they have also deducted National Insurance, but I need to confirm this with them.

I have contacted them about the tax deduction, and was advised that if too much tax has been deducted, I can get this reclaimed from HMRC at the end of the financial year.

Nothing I have read online about the tax due on redundancy payments mentioned this way of dealing with the tax due, so I wanted to ask if this is normally how it's done, and is there any way to reclaim any excess tax I have paid sooner than the end of the financial year?

comeandgo

Yes, this is normal with large payments, you could write to HMRC and tell them you have ceased all employment and only income will be pension but they will probably only know how much you have overpaid for the tax year at the end of the tax year.

xylophone

https://www.gov.uk/staff-redundant/redundancy-pay

Tax
Employees who’ve been made redundant only pay tax on payments over £30,000. They don’t pay any National Insurance.

Tax and National Insurance are deducted from other termination payments, for example payment in lieu of a holiday or notice.



https://www.gov.uk/claim-tax-refund/youve-stopped-work


You were made redundant
Call HM Revenue and Customs (HMRC) if you’ve overpaid tax because of your redundancy payment. They may be able to refund you before the end of the tax year.