Estimated tax on redundancy payment - are my calculations correct? 28 December 2022 at 12:30PM in Redundancy & redundancy planning 4 replies 576 views

skipfeeney

Hi All,

If you were to receive an 80k redundancy payment in the new tax year - how much tax would you be expected to pay? This is what I have calculated, does this look correct?

• 80k - 30k (tax free allowance) = 50k
• first £12,571 =  is tax free
• 12,571 - 50k = 37429 (this is taxed at 20%)
• 20% of 37429 = £7485.8

Can I also just check that if you receive regular payments for being on call and it is in your contract then these payments will be included in any redundancy pay calculation?

Thanks

molerat

No.  It will be treated as a monthly pay and if paid in April only £1048.26 tax free so £20774 tax deducted from £50K.  That will not be the tax due for the year but will be what is deducted under the regulations.  If you intend not to work and have no other income then you will be able to reclaim the difference from the £7485 due for the year.

skipfeeney

molerat said:

No.  It will be treated as a monthly pay and if paid in April only £1048.26 tax free so £20774 tax deducted from £50K.  That will not be the tax due for the year but will be what is deducted under the regulations.  If you intend not to work and have no other income then you will be able to reclaim the difference from the £7485 due for the year.

Wow - thanks for that.  Didn't realise.  Would I have to wait until the end of the year to claim the rest back?  I am trying to work out if I should put some money in a pension to avoid tax but its difficult to know how long it will take me to find a new job!

getmore4less

Do a P50.

Just follow the rules.

https://www.gov.uk/government/publications/income-tax-claiming-tax-back-when-you-have-stopped-working-p50

MazzaMan

You could pay the 50k into your pension.