20% or 40% on VR Offer

Barney15c

Short and sweet,  On a £70K VR offer of which £30K is tax free, do you pay 20% or 40% tax on the remaining £40k
Thank you.

400ixl

Depends on what you have already earned in the tax year. It is just seen as additional income. You then have to also think about the rest of this financial year when you get another job as that will also be taxed at the combined rate.

Barney15c

I wont be working after i leave at the end of Aug 22 , my VR will easily last me into my retirement and taking my works pension in Feb 2024. Gross pay will total  £16500 by end of Aug 22 and tax code L1250.

daveyjp

So your earnings for this tax year will be £56,500?

You will pay 40% on all income above £50,271.

NI is calculated on your monthly pay, so you will pay NI on the combined salary for August and the £40k.

Barney15c

no about £40k  is my pre tax income April 22to August 22 inclusive is 5 x £3300 =£16500 after that i wont be earning as i don't intend to work..

molerat

Back of fag packet calculation assuming you receive the redundancy money with your August pay

You will have received £56500 YTD. With PAYE 40% tax will kick in at £20950 YTD in August so you will be taxed around £15.5K that month, £17360 YTD. Tax due on £56.5K for the whole year is just over £10K, 40% starting at £50271, so if you are not intending to receive any further taxable income for the rest of the year you will be able to reclaim around £7300 tax as soon as you receive your P45. https://www.gov.uk/claim-tax-refund

theoretica

Barney15c said:

no about £40k  is my pre tax income April 22to August 22 inclusive is 5 x £3300 =£16500 after that i wont be earning as i don't intend to work..

Exactly - 16500 salary + 40000 taxable VR = 56500 total income.

superbigal

If in Scotland 41% higher rate tax and it starts at £43,663