📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Tax on Voluntary Redundancy Offer

Options
This may be a very simple  question to answer , but i cant find anything on the net to help me work out how much tax i will be paying on my VR  offer.
I will be leaving my workplace on 31/8/22 , i have accepted  a VR offer of just shy of £70k.
I am trying to work out  roughly what this will be  after tax deductions.
I know the first £30k is tax free and so will be paying tax on the remaining £40k.
What are the deductions?  Will i be paying 20% or 40% on the remainder? 
Do i pay 40% because the total of my offer is over £50k or 20% because the taxable part of my offer is £40k and under the 40% tax band of £50k
I will also have 7 months of my tax allowance left. I earn just over £40k a year (just a few hundreds over).i get the full tax allowance of £12.5k
I do not plan to work after I leave and will be taking my works pension when I get to pensionable age of 60 (Feb 24)
Any help will be appreciated in helping  we work out what i will be getting.

«1

Comments

  • Are you interested in what will be deducted when the payment is made or what the actual tax will be when the whole tax year is reviewed?

    And do you know if this payment will be made at the point you leave and get your P45 or will it be a payment made after you have left?
  • Barney15c
    Barney15c Posts: 26 Forumite
    Second Anniversary 10 Posts
    Dazed, i would like an approximation of what i will be receiving after tax, AFAIK I shall be receiving my compensation with my last salary payment (End Aug 2022) I understand i may be  making a tax over/underpayment which i may have to claim back.
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 17,632 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 20 May 2022 at 11:00AM
    Then the simplest option is to use this calculator.

    http://payecalculator.hmrc.gov.uk/PAYE0.aspx

    You need to enter your April payslip details (or May if already available) and make sure the tax deducted matches your payslip (very few details are needed, tax code, taxable pay and payment date from your payslip).

    Then enter May's pay and change the payment date and note the details.

    Do the same for June and July so you end up with your taxable pay and expected tax deductions after being paid in July.

    Then add in the August figures, including the taxable element of your redundancy, and you will how much tax will be deducted from the final payment.

    If you don't expect to be paid by another job or pension between then and 5 April you are almost certainly going to have overpaid tax at that point.
  • Barney15c
    Barney15c Posts: 26 Forumite
    Second Anniversary 10 Posts
    Thank you Dazed, i will do that now, i expect my later months to be around the same amount , i only want a rough approximation so i can plan what i have to live on until i reach pensionable  age of 60.and can claim my full works pension.
  • In that case you can skips some steps and just multiply your April pay by 5 and enter that for July with the expected July payment date and April's tax.

    The calculation will show a large tax deduction for July which you can ignore but you will then have the July tax value to use when inputting the all important August details.
  • Barney15c
    Barney15c Posts: 26 Forumite
    Second Anniversary 10 Posts
    Many Thanks Dazed
  • This isn't perfect but if you don't expect to have any further taxable income and your tax code is likely to be correct, for example you are on the standard emergency code of 1257L then you can just change the payment date to 31/03/2023 and see what the actual tax due is likely to be be.

    Compare that to the August cumulative amount to see how much you will potentially get refunded.
  • Barney15c
    Barney15c Posts: 26 Forumite
    Second Anniversary 10 Posts
    Thank you, ill try that.
  • Browntoa
    Browntoa Posts: 49,607 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Is there no option to defer part of the VR ? 

    I was able to defer part of the payment until the start of the next tax year 
    Ex forum ambassador

    Long term forum member
  • Barney15c
    Barney15c Posts: 26 Forumite
    Second Anniversary 10 Posts
    I'm really not up on tax  matters, i expect there is an option to defer but i don't now the detail of it.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 351.1K Banking & Borrowing
  • 253.2K Reduce Debt & Boost Income
  • 453.6K Spending & Discounts
  • 244.1K Work, Benefits & Business
  • 599.1K Mortgages, Homes & Bills
  • 177K Life & Family
  • 257.5K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.