Yes or No answer needed please - Taxation implications of redundancy on overall income
AItchos
Forumite 2 Posts
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
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
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Replies
No wonder you are confused.
Anyway NO and C are the best fit.