Yes or No answer needed please - Taxation implications of redundancy on overall income

Hi Everyone

I've searched the forums here for an answer but would like some clarification on how my redundancy payment will effect my taxation.
The question is basically if redundancy counts toward my overall income for the year, and therefore leaves me owing money.
Let's say I have 25k redundancy and 10k in Pay In Lieu Of Notice with 40k earnings for the year. Does the fact that all taxable earnings are 50k, i.e. PILON and Wage together mean that overall tax due will remain at 20% rather than 40% (which kicks in at 50k). Or does the 25k redundancy, although not taxed in itself, count toward overall earning for the year? I.E 25k + 10K + 40k = 75k? 

My thinking is if the redundancy counts toward overall earnings then in the example above 25k (75k - 50k) would be taxed at 40%. Meaning that there'd be an additional 20% due to be taxed on that 25k - i.e. 5k. That being the case, and it being the end of the financial year, would my final pay at the end of march see the 10K component of taxable income hit with either 40% tax or even the full 5k taken?
In my mind there's two scenarios.

A: Redundancy isn't added to taxable income for the year and the example above would just miss having to pay 40% tax
B: Redundancy IS added to taxable income and the example above would owe that additional 20% for the 25k over 50k.
or of course C, where I'm missing something and the tax implications are different!

Hope that makes sense. So A, B or C? 

Thanks a lot for you help in advance. 

Regards

H

Comments

  • p00hsticks
    p00hsticks Posts: 12,800 Forumite
    First Post Name Dropper Photogenic First Anniversary
    I vote for A (although I realise that isn't the Yes or No answer asked for in your thread title ;-) )
  • JJG
    JJG Posts: 330 Forumite
    First Anniversary Name Dropper First Post
    You know if you have say £50,001 income. The 40% tax is only paid on the £1 over the 50k? Not on the whole salary?
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Name Dropper First Anniversary First Post I've helped Parliament
    Three questions and one does not  have a yes no answer it's multiple choice.

    No wonder you are confused.

    Anyway NO and C are the best fit.
  • Croeso69
    Croeso69 Posts: 252 Forumite
    First Post Name Dropper Photogenic
    Only taxable income would be included. This would include redundancy amounts in excess of £30,000 (zero in this case).
  • Great thanks for that everyone. For those struggling, A would be 'No', B would be 'Yes', and C would be 'other' - because I wouldn't presume to have thought of everything. 
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