Trying to work out Tax Rebate 23 January at 4:34AM edited 23 January at 4:38AM in Cutting tax 16 replies 312 views

Barney15c

I took voluntary redundancy in Aug 2022 the offer was £72,000 (£30,000 was tax free) i paid tax on the other £42,000 plus my last salary of £3,463 which was at the 40% rate.

As a rough estimate, what sort of rebate could i expect back as i will not have worked up to the end of the 2022/23 tax year? (7 Months)

I have the standard tax code of 1257L

Dazed_and_C0nfused

£7,389.  Assuming no other taxable income is received during the current tax year.

Although you could bump that up a fair bit  by making some relief at source (RAS) pension contributions and increasing your basic rate band.

Barney15c

Thank you Dazed,
Of course there are no guarantees, but thats more than i anticipated, i would be happy with 5k. Will be a pleasant surprise if it is near your figure. Appreciate your reply.

purdyoaten2

Barney15c said:

Thank you Dazed,
Of course there are no guarantees, but thats more than i anticipated, i would be happy with 5k. Will be a pleasant surprise if it is near your figure. Appreciate your reply.

His figure is spot on. £58776 income less personal allowance 12570 leaves 46206 taxable. 37700 at 20% plus 8506 at 40% is 10942.40. You paid 18332.33 which is £7389.93 too much.

Barney15c

Thanks Purdeyoaten2 - that will be a welcome surprise come April, will get me a much needed newer car!

purdyoaten2

Barney15c said:

Thanks Purdeyoaten2 - that will be a welcome surprise come April, will get me a much needed newer car!

I think that April might be a tad ambitious if you are waiting for HMRC to review - September more realistically. However, if you definitely have no prospect of any additional income this tax year, this is the route to go:

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

Barney15c

Purdyoaten2 -  yes  i'm i no real rush , no i am planning on living on my VR money until i take my work pension in August, i have no intention  working or have any other taxable income up to the end of Tax year 22/23 . I will definately take a look at your link though, many thanks for that.

Would i be better off waiting until April to claim for my refund using the link you gave above, to ensure i would get the full amount instead of only 5 months worth?

singhini

Are you able to put some money into a SIPP before 5th April 2023?  (lets say £10,000), as you could be much better off. 


 £58,776.81     Taxable Income
-£12,570.00     Tax Free Allowance
-£10,000.00     put into SIPP
----------------
 £36,206.81     Actual Taxable Income
 £  7,241.36     Actual tax payable (£36,206.81 @ 20%)
----------------
 £11,090.97     Tax overpaid  (£18,332.33 less £7,241.36)
-£  2,500.00     Tax relief automatically claimed by the SIPP provider 
----------------
£  8,590.97     Money coming back to you after April/May 2023 onwards


I think I've worked this out correctly  (happy to be corrected).

purdyoaten2

Barney15c said:

Purdyoaten2 -  yes  i'm i no real rush , no i am planning on living on my VR money until i take my work pension in August, i have no intention  working or have any other income up to the end of Tax year. I will definately take a look at your link though, many thanks for that.

Would i be better off waiting until April to claim for my refund using the link you gave above, to ensure i would get the full amount instead of only 5 months worth?

No - the whole point of the form P50 is that you can claim the tax refund for the full year BEFORE the end of the tax year so long as you can state that you will have no more income in that tax year. 

It would certainly likely be quicker than waiting for HMRC to get round to reviewing your tax affairs along with millions of others.

Dazed_and_C0nfused

singhini said:

Are you able to put some money into a SIPP before 5th April 2023?  (lets say £10,000), as you could be much better off. 


 £58,776.81     Taxable Income
-£12,570.00     Tax Free Allowance
-£10,000.00     put into SIPP
----------------
 £36,206.81     Actual Taxable Income
 £  7,241.36     Actual tax payable (£36,206.81 @ 20%)
----------------
 £11,090.97     Tax overpaid  (£18,332.33 less £7,241.36)
-£  2,500.00     Tax relief automatically claimed by the SIPP provider 
----------------
£  8,590.97     Money coming back to you after April/May 2023 onwards


I think I've worked this out correctly  (happy to be corrected).

Personal contributions to a SIPP would be paid using the relief at source (RAS) method so don't reduce your taxable income.

If the gross contribution was £12,500 then the basic rate band would be extended from £37,700 to £50,200 meaning all the income above the Personal Allowance would be taxed at 20% rather than a mix of 20% and 40%.

Barney15c

I cant afford to invest into a SIPP yet although i may be able to once i receive my lump sum in August 2023 would there still be a tax advantage to doing that then?
Singhini: Many thanks for the breakdown of figures.