How does redundancy affect tax

I'm being made redundant in July and wondering how it will affect my tax year. I'll make up some numbers to assist...
Lets say I'm getting a £40,000 redundancy package. £30,000 of it is tax free, and the other £10,000 is taxed. Does all £40,000 count towards my April to April income and therefore anything above this is taxed as such (meaning my £12,500 tax free allowance is already used up) and I'm already close to the 40% tax bracket, or does only the taxable £10,000 count towards my April to April income (therefore leaving £2,500 of my tax free allowance) and still a ways off the 40% bracket. Or finally, does none of it count towards my annual income and therefore I still get my £12,500 tax free allowance?

Comments

  • Comms69
    Comms69 Posts: 14,229
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    £30k is tax free. it is ignored as income. The rest is taxed normally. 
    Since you'll have paid some tax already, you obviously dont have £12.5k tax free left over. But yes the £10k is counted as income, so would use some of that (or be taxed at 20% and use none of it). Chances are you'll be due a rebate if you dont work again this tax year.
  • stefan91
    stefan91 Posts: 7
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    edited 4 May 2020 at 1:06PM
    Comms69 said:
    £30k is tax free. it is ignored as income. The rest is taxed normally. 
    Since you'll have paid some tax already, you obviously dont have £12.5k tax free left over. But yes the £10k is counted as income, so would use some of that (or be taxed at 20% and use none of it). Chances are you'll be due a rebate if you dont work again this tax year.
    Yeh I left out any earnings this tax year already/up to when I'm made redundant in July for simplicity's sake. Thanks for your response though as I was struggling to find a clear answer elsewhere. 
  • Comms69
    Comms69 Posts: 14,229
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    stefan91 said:
    Comms69 said:
    £30k is tax free. it is ignored as income. The rest is taxed normally. 
    Since you'll have paid some tax already, you obviously dont have £12.5k tax free left over. But yes the £10k is counted as income, so would use some of that (or be taxed at 20% and use none of it). Chances are you'll be due a rebate if you dont work again this tax year.
    Yeh I left out any earnings this tax year already/up to when I'm made redundant in July for simplicity's sake. Thanks for your response though as I was struggling to find a clear answer elsewhere. 
    No probs. You could look at how much could be put into your pension, as it will limit your tax liability. 
  • unholyangel
    unholyangel Posts: 16,863
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    edited 13 May 2020 at 5:57AM
    Your redundancy package will be made up of several elements. Elements such as wages, notice/pilon, holiday etc will be taxable. It is the actual redundancy payment (ie compensation for losing your job) thats not taxable on the first 30k. 
    You keep using that word. I do not think it means what you think it means - Inigo Montoya, The Princess Bride
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