Offsetting tax on redundancy payout.

intalex

intalex wrote: »

Wow, had no idea it was different (more!!) that's new learning for me

Just to add one more tier when redundancy comes into play:

- First £30,000 of ex-gratia (i.e. not salary/holiday): 0%
- Next £12,500: 0% (personal allowance)
- Next £37,500: 20%
- Next £50,000: 40%
- Next £25,000: 60% (effect of personal allowance erosion)
- Next £25,000: 40%
- Anything above that: 45%

Actually, anyone know if the 4th tier above should be £50k or £20k, i.e. does that first £30k of ex-gratia count towards the £100k threshold above which personal allowance gets eroded and also towards the £150k threshold above which tax rate becomes 45%?

Heedtheadvice

Intalex...


Not just more, but more initial bands, different higher bands for earned income,.....and the common uk bands for unearned income.......more or less!


Can be a bit of a nightmare (thank you Nicola S ) and would make the answer to the OP's question a tad more complicated!!

nomorekids

jumping on board here, can someone clarify ? I thought once you had taken the tax free lump sum from your personal pension you were limited to £4000 pension contributions from then on?

intalex

intalex wrote: »

Actually, anyone know if the 4th tier above should be £50k or £20k, i.e. does that first £30k of ex-gratia count towards the £100k threshold above which personal allowance gets eroded and also towards the £150k threshold above which tax rate becomes 45%?

Seems the answer is £50k if the following thread is correct:
https://forums.moneysavingexpert.com/discussion/5912835/redundancy-payment-what-counts-towards-the-100k-tax

IanSt

nomorekids wrote: »

jumping on board here, can someone clarify ? I thought once you had taken the tax free lump sum from your personal pension you were limited to £4000 pension contributions from then on?

Only taking the tax free lump sum of a dc pension is fine and won't impact the contributions you can make.