National Insurance On Redundancy Payout

StephenM_2

My employer is are currently going through a round of redundancies. According to their calculator I'd get about £48900 redundancy pay of which £18900 would be subject to tax/NI, plus about £11300 PILON, which is also subject to tax/NI. So £30200 is taxable/NI-able.

I understand how the tax is calculated, but how is NI calculated, bearing in mind that it greatly exceeds the monthly upper earnings limit.

Actually I'm pretty confident I won't be affected this time round. My question is more for future reference, as I'd be very tempted to volunteer if offered a similar deal in 2 or 3 years.

daveyjp

NICs are paid on earned income.  If you get a large payout you will pay whatever is due on the amount paid.

One way of mitigating the amount of tax and NIC on a large redundancy payment is to pay everthing over the tax free limit into a pension.

doodlez1612

I’ve just been made redundant and my pay was all done in one lump which pushed me up to the next NI bracket. You pay 12% on everything you earn between £792 and £4167 per month and just 2% on anything over £4167. So most of that will only have 2% NIC.