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How does redundancy affect tax

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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 Forumite
    10,000 Posts Third Anniversary Name Dropper
    £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 Forumite
    Second Anniversary First Post
    edited 4 May 2020 at 2:06PM
    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 Forumite
    10,000 Posts Third Anniversary Name Dropper
    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: 16,866 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 13 May 2020 at 6:57AM
    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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