Hypothetical Large Redundancy Question

Tammer

I hope you can help with a question.  I need to know if the £30k tax free part of a redundancy payment reduces your earnings in terms of losing the personal allowance.

For example, say someone is made redundant now (part way through the tax year):

• earnings from 6 April to 7 June: £25k
• Redundancy payment: £100k.

With total earnings in the tax year of at least £125k, this would mean loss of the personal allowance.  Does the £30k tax and NI free redundancy allowance mean that taxable earnings in the tax year are £95k so no loss of personal allowance?

I hope I’ve explained that clearly.

FIREDreamer

The £30k is not taxable and is not included on any P45 / P60. It isn’t taxable income so your personal allowance is fine if you get £95k including taxable redundancy.