New post old subject - redundancy

Pete_123

I am soon to be made redundant and planned to pay the redundancy payment into my pension but I am a bit lost regards the tax side of things.

For the most part I am a basic rate tax payer though now redundancy has reared its head I ran my salary though HRMC's tax calculator and I dip into the higher rate tax band each month by about £750. I should have been more on top of things and paid that £750 as an AVC into my pension each month but that's my problem.

Either way 30 years service and an old school contract and the redundancy payment will exceed three figures.

I have £40k unused pension allowance for this tax year and £96k unused allowance in total for the past three years so I can use carry forward and not incur a charge for paying it all into my pension.

30k of the redundancy payment I can take tax free.

My employeer will allow a lump sum payment into my pension before I am made redundant but only to a maximum of eight months salary.

I assume best I ask for £32k to be paid into the pension which with tax relief that will max out this years pension allowance.

Obviously the rest of the redundancy payment will be treated as income by HMRC so is that it or am I being naive (or hopeful) and as I have £96k pension allowance from previous tax years can I then claim back the basic rate tax on that amount when I pay it into the pension?


Pete

AlanP_2

How much is the redundancy payment and how much other earned income will you / do you have this tax year? Your "more than 3 figures" suggests £1000 to £9999 to me but I guess it's more after 30 years.

Ignore AA for now - You are limited to your relevant earnings in the tax year (hence the questions above).

If there is any additional money left over and above the £30k tax free and what your employer will pay in to their scheme for you you do have the option of paying that in to a separate SIPP.

Pete_123

Sorry for not being more exact I figured talking real figures is a bit vulgar but it is what it is. I guess I'm stupid saying three figures it is actually £160k, in my head that was three figures with some zeros!


So I have literally just received my last payslip and that covered 6th April - 5th May and is just over £4k so that is all my earnings for this tax year aside from the redundancy payment which I get next month.



I am just over 50 so I am definitely hoping to get another job real soon but the rest of my earnings this tax year in relation to a job is unclear so far.

AlanP_2

Ok so 130k of the redundancy is taxable then. So that + £4k is the limit of what you can pay in to a pension gross.

Sounds like you have enough AA to cover it with carry forward.

Remember it is not accessible until you are 55 under present rules.

Pete_123

So doesn't the redundancy pay or any element of it count as relevant earnings for this tax year? If not then I assume it means they have made it worse by making me redundant and waiting until the new tax year before letting me go when my earnings would be relatively negligible.

Linton

Pete_123 wrote: »

So doesn't the redundancy pay or any element of it count as relevant earnings for this tax year? If not then I assume it means they have made it worse by making me redundant and waiting until the new tax year before letting me go when my earnings would be relatively negligible.

The redundancy pay beyond the tax free £30K counts as "earnings".

AlanP_2

Pete_123 wrote: »

So doesn't the redundancy pay or any element of it count as relevant earnings for this tax year? If not then I assume it means they have made it worse by making me redundant and waiting until the new tax year before letting me go when my earnings would be relatively negligible.

Probably the way I answered sorry.

£130 + £4k = £134K relevant earnings.