Redundancy and tax 15 July 2020 at 10:45AM in Redundancy & redundancy planning 2 replies 117 views

Voldemort59

I may be being made redundant shortly and know that £30k of redundancy pay is tax free. I am a basic rate tax payer but will i incur an element of higher rate tax on my redundancy pay if that takes me over the threshold once added to what i've already earned this year ? If higher rate tax is deducted can this then be claimed back from HMRC or is it case of bad luck..for this year you're a higher rate tax payer due to the redundancy pay out ? 

dano17439

It all depends what you year to date taxable earnings will be. Look at it this way. If you earn 30k a year, but it was all paid in month 1, this would attract a higher rate of tax. however you would get a tax rebate every month to the end of the tax year, so at the end, you would of paid the correct amount of tax for the year for the 30k earned 

daveyjp

If you are likely to receive more than £30k redundancy consider a lump sum pension payment on everything above the tax free amount to avoid the income tax.