Redundancy Payment - What counts towards the £100K Tax 22 October 2018 at 9:40AM in Redundancy & redundancy planning 6 replies 2.7K views

FudgeHouse

Good morning

I am being made redundant from my current employer and will be paid a Redundancy Payment of just under £60K, of which the first £30K will be free of tax.

My total income for the tax year (including that full £60K) will be around £113K (Current Job + Redundancy Pay + a new job which I will start immediately)

My question is whether the first £30K of untaxable income is completely disregarded for income tax purposes (such that HMRC will consider my income to be £83K for the tax year), or is they still count that £30K as income and therefore I will fall in to the 'over £100K' bracket and therefore I will start to lose my Personal Allowance ?

Thanks

getmore4less

The £30k does not form part of taxable income.

FudgeHouse

The £30k does not form part of taxable income.

Thanks - so, I know that the £30K is not taxable, but just to confirm you're saying that as it is not taxable it also does not form part of my income to calculate rates of tax ? If so that's the news I wanted :-)

Dazed_and_confused

Conversely savings interest and dividend income taxed at the 0% "Personal Savings Allowance" and "Dividend Allowance" rates is still taxable income and does form part of your total income for adjusted net income purposes.

Me2you

Just wait until the end of the year?

marlot

FudgeHouse wrote: »

Good morning

I am being made redundant from my current employer and will be paid a Redundancy Payment of just under £60K, of which the first £30K will be free of tax.

My total income for the tax year (including that full £60K) will be around £113K (Current Job + Redundancy Pay + a new job which I will start immediately)

My question is whether the first £30K of untaxable income is completely disregarded for income tax purposes (such that HMRC will consider my income to be £83K for the tax year), or is they still count that £30K as income and therefore I will fall in to the 'over £100K' bracket and therefore I will start to lose my Personal Allowance ?

Thanks

When I was made redundant (6 years ago), the £30k was not on my gross pay on the payslip and not on my P45. I believe your income will be shown to HMRC as 83k.


If you get a new job lined up fairly soon, it can be a good time to top up your pension.

FudgeHouse

Thanks for everyone's replies - I'm reassured now I'm not going to have my Personal Allowance eaten away ! :T