Tax on Redundancy Payment

Newbiehelp01

Hi, looking for some advice on Redundancy tax deductions, I am being made redundant in June 2025, pay date will be 25th June,  leave date 30th June, currently on 32,000 per year, basic rate payer 21% Scotland, enhanced payment of 74,788 total, ( includes 10, 439 PILON), from my understanding I will get 30,000 tax free, how much will my remainder be charged at, will it all be 40% including my last month pay, currently 2089 after deductions, can anyone give me some help with this, would be appreciated, thanks

Ayr_Rage

Tax rates for 2025/26 are not yet published in Scotland.

BoGoF

I assume you mean June 2024?

There is no 40% rate in Scotland. You will initially pay varying rates on it, some at 21%, some at 42%, perhaps some at 45 and 48%. 

Newbiehelp01

Hi, no 2025, still be here for another 14 months, but got paperwork with indicative quoted figures, just trying to work out roughly how much would be deducted, yeh sorry just noticed it was currently  42%, thanks

BoGoF

There's a lot of variables at play that will affect the overall result. The Scottish Govt usually set their rates in November for the following tax year and thresholds and rates may change for 25/26.

A new UK Govt may increase the personal allowance next year.

If you have a works pension scheme how are the contributions treated - do they come off gross or net pay or salary sacrifice?

Newbiehelp01

Hi BoGoF, can you explain further what you mean by I will pay some at all they higher rates, if my first 30,000 is tax free, then that would leave 44778 plus that month salary, that would certainly push me into the 42% bracket (current tax bands), but would the full amount be charged at say 42%?, so roughly 19,700 tax deducted, thanks

BoGoF

Newbiehelp01 said:

Hi BoGoF, can you explain further what you mean by I will pay some at all they higher rates, if my first 30,000 is tax free, then that would leave 44778 plus that month salary, that would certainly push me into the 42% bracket (current tax bands), but would the full amount be charged at say 42%?, so roughly 19,700 tax deducted, thanks

The tax rates shown above are for the full year but the way PAYE works is that you get 1/12th of your personal allowance and each rate band per month. So assuming your final payment is June 2025, that is Month 3 of the tax year so you will get 3/12ths of everything when your employer calculates the tax. Depending on what you do afterwards (employment wise) you may get some of the tax back.

I would have done a calc but don't have the time right now.

Newbiehelp01

Basic salary at top then list of deductions, pension deducted in they totals, so would that be gross?

Newbiehelp01

BoGoF said:

Newbiehelp01 said:

Hi BoGoF, can you explain further what you mean by I will pay some at all they higher rates, if my first 30,000 is tax free, then that would leave 44778 plus that month salary, that would certainly push me into the 42% bracket (current tax bands), but would the full amount be charged at say 42%?, so roughly 19,700 tax deducted, thanks

The tax rates shown above are for the full year but the way PAYE works is that you get 1/12th of your personal allowance and each rate band per month. So assuming your final payment is June 2025, that is Month 3 of the tax year so you will get 3/12ths of everything when your employer calculates the tax. Depending on what you do afterwards (employment wise) you may get some of the tax back.

I would have done a calc but don't have the time right now.

Thanks for that explanation, will be planning to get another job right away hopefully as I will only be 54 next year!!, appreciate your time, thanks again

BoGoF

Newbiehelp01 said:

Basic salary at top then list of deductions, pension deducted in they totals, so would that be gross?

Does it show a gross pay ans then a taxable pay figure? Do they differ?

Newbiehelp01

BoGoF said:

Newbiehelp01 said:

Basic salary at top then list of deductions, pension deducted in they totals, so would that be gross?

Does it show a gross pay ans then a taxable pay figure? Do they differ?

It doesn't say gross or net, just basic salary figure