Redundancy and taxation query
in Redundancy & redundancy planning
3 replies 240 views
How can I calculate taxation on my VR payment given a full year’s salary already received?
I’m just about to apply for voluntary redundancy and the terms are, if accepted, that I will need to leave by the end of this financial year (31/3/22).
I currently earn £56,000 and would receive two year’s salary as my contractual redundancy package with no PILON (notice would normally be 3 months). Obviously this would leave me with a significant amount of income tax although I’m not sure how to calculate it. Does anyone know of an easy to use online calculator? We’ve asked for one at work but I doubt it will be available in time.
Can anyone give me a ballpark sum of what I’d receive net so I can have an idea of budgeting/investing options. I have a very good pension (part final salary/part career average) so could I put some into that to reduce the taxation? Or any other suggestions.
Have some sessions that my trade union and employer are putting on re personal finance and pensions but just wanted to do some research prior so I can ask more informed questions.
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£30,000 is tax free
Tax and NI to pay on £82,000. As you already earn £56,000 and in the 40% threshold (assuming you aren't in Scotland) you will pay 40% on the £82k. You will also take a hit on NI payments as NI is paid on the monthly salary payment, not on an annual basis.
Paying into pension is the usual way of reducing tax and NI impacts, but annual allowances need to be taken into account and as this is DB/care pension calculating that figure is more complicated. Your pension provider should be able to let you know how close you are to the limit.
As this needs to be done by end of March slipping payments into the next tax year may not be an option, if it is that also changes things!
Assuming the £82k is paid in the current tax year.