Tax on Redundancy

Johnny_Doe

I'm due a sizeable redundancy payment but would like to minimise tax.

Understand £30.k tax free and rest is taxed.

Also understand I can pay into pension up to £60k year..

I am due to receive payment end of Jan.

My question is can i ask payroll to split the redundancy payment and pay a proportion next tax year end of april or 6th april? 

Ive used up previous 3 years of pension allowances hence the question..

Thanks

housebuyer143

It's unlikely. When I was made redundant they told me they would split mine over two months but the actual redundancy payment had to be in the first months pay. I'm not sure the reason for this but I imagine there was one because they were really insistent on this.

[Deleted User]

Hi,

it may depend on your actual redundancy date, how can payroll pay you next tax year when no longer employed with company?

Johnny_Doe

Thanks for the responses, much appreciated HR have confirmed that as i wont be employed by the company it wont be classed as earnings. As usual I was given duff info on this on another forum.. it looks like i'll have to pay 40% tax , oh well you cant win 'em all!

MetaPhysical

Johnny_Doe said:

I'm due a sizeable redundancy payment but would like to minimise tax.

Understand £30.k tax free and rest is taxed.

Also understand I can pay into pension up to £60k year..

I am due to receive payment end of Jan.

My question is can i ask payroll to split the redundancy payment and pay a proportion next tax year end of april or 6th april? 

Ive used up previous 3 years of pension allowances hence the question..

Thanks

HMRC have very strict rules about companies doing that.  Of course, if your redundancy date is indeed in April then that's perfectly legit.  However, I have been told by my company's HR team that after the collective consultation and redundancy letters being sent out there are grace and time periods by which the ex-gratia payment must be made.  If that carries into the new tax year beyond April 6th then happy days for you.  However, often times it doesn't which means that the ex-gratia above the 30k is subject to normal income tax and can land you a heavy bill and push you into higher rate/additional rate bands and the dreaded 60% marginal tax band.

This 30k threshold has not increased in decades and is another stealth tax.  It is not at all what you need after losing your job.

You do not have to pay NI contributions on ALL of the ex-gratia payment, don't forget.

littleboo

Do you have any unused pension allowance from previous years?