Redundancy looming

I_am_not_a_number

Having worked for the same company for the last 28 years I am facing the prospect of redundancy early next year. I have been told I will get a maximum 2 years settlement lump sum in the region of £68K. I understand that the first £30K is TAX free and the rest will be taxed at a higher rate. If I get paid this lump sum on the 31st March will I lose out or should I ask for the payment to be deferred until the new financial year? Any suggestions would be appreciated.


Thanks in advance.

rotate

I was in a similar situation,however my company legally paid the amount over £30k into the pension fund and then paid it to me as a tax free lump sum as a part of the pension,without me having to start drawing the pension.
I have also read about this in various postings on this board,so would recomend that you talk to your HR dept and your pension department as for me this was extremely helpful.

Browntrout_2

I do not know anything about the tax options, I was made redundant two years ago and after getting over the shock I looked upon it as an opportunity, i.e. not looming but a new start mentality.

My employer paid for Career Consultation which helped me network and plan the future without the previous employer, I met others who were retiring and not looking for a new job.

Good luck in whatever you decide to do with your freedom.

PS - I put most of my cash into Unit Trusts as I started a new job 1 week after collecting the pay-off, and had three months garden leave prior to that.

Debt_Free_Chick

I_am_not_a_number wrote: »

I understand that the first £30K is TAX free and the rest will be taxed at a higher rate. If I get paid this lump sum on the 31st March will I lose out or should I ask for the payment to be deferred until the new financial year?

The excess over £30k is paid taxed via PAYE, but still included in your income for the year.

If it's deferred and paid in 2008/2009 whilst PAYE might only deduct basic rate tax, you might still end up with a higher rate tax liability, depending on your total income for the year.

It's only worth deferring if you can be certain that your total taxable income in 2008/2009 is going to be within the BR band - including this compensation payment.

And, of course, you'd have to get your employer to agree to your plan .... and convince the tax man that the payment relates to 2008/2009.

Difficult to avoid the tax in this situation.