Redundancy - Paying tax on notice period not worked

Luke_321

Undervalued said:

Luke_321 said:

Thanks for your help.

I guess my main question is whether i should have been taxed in the first place if i never worked the notice period, nor was i paid the notice period in lieu.

This is almost 10k in tax for a notice period i never worked.

Yes you should.

You had either a statutory right or a contractual right to your notice pay, which is taxable. You can't forgo the notice pay and add an equivalent sum onto your redundancy / compensation (which is tax free up to £30K) so as to avoid the tax due on the notice pay.  

Thanks Undervalued,

That makes sense if i was given a choice, but i wasnt.
I wasnt allowed to work notice nor allowed to be paid in lieu.

In that case surely i shouldn't have been taxed on the non existent notice period.

Dazed_and_C0nfused

b.  Yes.  PAYE is only ever provisional and £20k paid in one pay period early in the tax year is virtually always going to attract plenty of 40% or possibly 45% tax.

If that is more than you ultimately need to pay you will get a refund of any tax overpaid.  Either via future salary/pension payments in the current tax year or direct from HMRC.

chrisbur

Luke_321 said:

chrisbur said:

Obviously the P45 figure is not including the taxable pay of 19539.
However if I take the 19539 the tax due here is 7170.75
The tax figures given so far are 402 and 6769 which add up to 7171

Was the P45 issued before the extra payment was made?

Can you advise the amount(s) of money that you received
Eg £x  for the 3089 £x for the extra payment £x for redundancy then anything else not covered by these.
Then list all deductions I can then work back to see what you have received. 

Hi Chris,

The P45 was issued after both pay slips were issued.

On the first payslip:
Gross Pay 3537.42 (taxable pay 3059.87)
PAYE 402.2
NI A 298.73
Pension 477.55

Net Pay - 2358.94

Redundancy Slip:
Gross Pay (YTD) 20016.97
Taxable Pay (YTD) 19539.42

PENP 12646.12
Redundancy Pay NP NN 3833.43
Redundancy Pay NT 30000

PAYE 6769
NI A 318.08

NET PAY - 39392.47

The tax paid is 7171.20 as suggested but i guess my question is:
a. Should i be taxed for a notice period not worked or paid?
b. Should it be taxed at such a high rate?

Forgive me if I'm missing something obvious.

As I see it you have 30000 non taxable redundancy
Then PENP 12646.12
Taxable redundancy 3833.43
Earnings 3537.42

So total to be paid before deductions of 20016.97  plus of course the 30000
There are pension contributions on which no tax is due of 477.55
So we have 19539.42 as taxable pay.
Tax due on that is 7171.20  
You can check that here http://payecalculator.hmrc.gov.uk/PAYE1.aspx
Use code 1257L
Monthly
Week 1 NO
Gross 19539.42
the next three all 0
Payment date anything in month 1 I used 12/04/2023

Total to be paid was 20016.97
less tax 7171.20
NI 616.81
Pens 477.55
Total deductions 8265.56
Net to be paid 11751.41

Two payments made were 
39392.47
2358.94

Total  41751.41
30000 of which was untaxable redundancy which gives the net pay 
11751.41

In my opinion you have only been taxed on money that has been paid to you.
Yes it is high  (though not sure where the "almost 10k " came from) but this is due to 
the payment being made so early in the tax year.  Your actual tax will adjust as the tax year progresses
but that will depend on your future earnings.
I have no idea why the P45 was issued with these figures if the employer had all the details at the time.
I would check your personal tax account to ensure the full details are there.
If you are now working somewhere and the full details are not known to your currant employer I would contact HMRC
to ask for the details to be sent to new employer.

Undervalued

Luke_321 said:

Undervalued said:

Luke_321 said:

Thanks for your help.

I guess my main question is whether i should have been taxed in the first place if i never worked the notice period, nor was i paid the notice period in lieu.

This is almost 10k in tax for a notice period i never worked.

Yes you should.

You had either a statutory right or a contractual right to your notice pay, which is taxable. You can't forgo the notice pay and add an equivalent sum onto your redundancy / compensation (which is tax free up to £30K) so as to avoid the tax due on the notice pay.  

Thanks Undervalued,

That makes sense if i was given a choice, but i wasnt.
I wasnt allowed to work notice nor allowed to be paid in lieu.

In that case surely i shouldn't have been taxed on the non existent notice period.

You had a statutory right to either work your notice or be paid in lieu (generally the employer's choice because any well written employment contract with give the employer the right to make payment in lieu). 

It you genuinely didn't get the money you could sue them for it but it would still be taxable.

As I said earlier, what you can't do is get compensated in some other roundabout way to avoid the tax.

chrisbur

Undervalued said:

Luke_321 said:

Undervalued said:

Luke_321 said:

Thanks for your help.

I guess my main question is whether i should have been taxed in the first place if i never worked the notice period, nor was i paid the notice period in lieu.

This is almost 10k in tax for a notice period i never worked.

Yes you should.

You had either a statutory right or a contractual right to your notice pay, which is taxable. You can't forgo the notice pay and add an equivalent sum onto your redundancy / compensation (which is tax free up to £30K) so as to avoid the tax due on the notice pay.  

Thanks Undervalued,

That makes sense if i was given a choice, but i wasnt.
I wasnt allowed to work notice nor allowed to be paid in lieu.

In that case surely i shouldn't have been taxed on the non existent notice period.

You had a statutory right to either work your notice or be paid in lieu (generally the employer's choice because any well written employment contract with give the employer the right to make payment in lieu). 

It you genuinely didn't get the money you could sue them for it but it would still be taxable.

As I said earlier, what you can't do is get compensated in some other roundabout way to avoid the tax.

According to the details given by the OP they received a gross payment of £12646.12 as PENP (Post employment notice pay)
I must admit that PENP came in long after I finished working in payroll but from what I have read this would either be or include any PILON due.

Undervalued

chrisbur said:

Undervalued said:

Luke_321 said:

Undervalued said:

Luke_321 said:

Thanks for your help.

I guess my main question is whether i should have been taxed in the first place if i never worked the notice period, nor was i paid the notice period in lieu.

This is almost 10k in tax for a notice period i never worked.

Yes you should.

You had either a statutory right or a contractual right to your notice pay, which is taxable. You can't forgo the notice pay and add an equivalent sum onto your redundancy / compensation (which is tax free up to £30K) so as to avoid the tax due on the notice pay.  

Thanks Undervalued,

That makes sense if i was given a choice, but i wasnt.
I wasnt allowed to work notice nor allowed to be paid in lieu.

In that case surely i shouldn't have been taxed on the non existent notice period.

You had a statutory right to either work your notice or be paid in lieu (generally the employer's choice because any well written employment contract with give the employer the right to make payment in lieu). 

It you genuinely didn't get the money you could sue them for it but it would still be taxable.

As I said earlier, what you can't do is get compensated in some other roundabout way to avoid the tax.

According to the details given by the OP they received a gross payment of £12646.12 as PENP (Post employment notice pay)
I must admit that PENP came in long after I finished working in payroll but from what I have read this would either be or include any PILON due.

Well yes but the point I am making is that it is not possible, as far as I know, to get around paying tax on the notice pay the OP was entitled to receive, regardless of what method was used to pay it.

If it was, surely everybody leaving on redundancy or under a settlement agreement would be doing so!