Tax deducted from Early retirement incentivisation scheme

Mikey481

I recently left my job on an early retirement incentivisation scheme (voluntary redundancy)
My compensation was net £15000 (Paid April) which due to my tax code resulted in a gross payment of £26448 to achieve the £15000 net. It appears that I have been taxed as if I would be getting this monthly for the whole tax year will HMRC realise this or should I advise them as I will be a basic rate tax payer this year thanks

Green_hopeful

The HMRC tax wrongly. You should get the first £30k tax free. Then the rest is taxed at your normal rate. There is a form to complete if you are not going back to work. https://www.gov.uk/guidance/claim-back-income-tax-when-youve-stopped-working But if you got £26448 you shouldn’t pay any tax. Yes they assume you will get that amount monthly. If you need to contact the tax office I found the chat option the best. Type adviser into the chat and eventually it will put you through to a human. You need your name address date of birth and national insurance number to give them. Before 10 am is better. 

TheSpectator

Was the agreed redundancy payment £15,000? If so the employer should have just paid you £15,000 without deducting tax/NIC. Was there any element of normal salary/holiday pay included in the £26,448?

Mikey481

TheSpectator said:

Was the agreed redundancy payment £15,000? If so the employer should have just paid you £15,000 without deducting tax/NIC. Was there any element of normal salary/holiday pay included in the £26,448?

Apologies I may have muddied the waters but using the “R” word. My employer was insistent as it’s politically sensitive that it wasn’t a redundancy merely an opportunity to leave for those (over 55)to take early retirement so normal redundancy framework would not apply. However to achieve the £15000 net which was on offer in my tax situation they have had to use the gross figure of £26448 to end up with £15000 net. Hope this makes sense. I will contact HMRC to sort

Mikey481

TheSpectator said:

Was the agreed redundancy payment £15,000? If so the employer should have just paid you £15,000 without deducting tax/NIC. Was there any element of normal salary/holiday pay included in the £26,448?

No I had holiday pay/Pilon paid into my company pension 

TheSpectator

Mikey481 said:

TheSpectator said:

Was the agreed redundancy payment £15,000? If so the employer should have just paid you £15,000 without deducting tax/NIC. Was there any element of normal salary/holiday pay included in the £26,448?

Apologies I may have muddied the waters but using the “R” word. My employer was insistent as it’s politically sensitive that it wasn’t a redundancy merely an opportunity to leave for those (over 55)to take early retirement so normal redundancy framework would not apply. However to achieve the £15000 net which was on offer in my tax situation they have had to use the gross figure of £26448 to end up with £15000 net. Hope this makes sense. I will contact HMRC to sort

Well, that's a whole different story.

Essentially thectax situation will sort itself out - what is your future intentions employment wise?

Mikey481

TheSpectator said:

Mikey481 said:

TheSpectator said:

Was the agreed redundancy payment £15,000? If so the employer should have just paid you £15,000 without deducting tax/NIC. Was there any element of normal salary/holiday pay included in the £26,448?

Apologies I may have muddied the waters but using the “R” word. My employer was insistent as it’s politically sensitive that it wasn’t a redundancy merely an opportunity to leave for those (over 55)to take early retirement so normal redundancy framework would not apply. However to achieve the £15000 net which was on offer in my tax situation they have had to use the gross figure of £26448 to end up with £15000 net. Hope this makes sense. I will contact HMRC to sort

Well, that's a whole different story.

Essentially thectax situation will sort itself out - what is your future intentions employment wise?

Unlikely but not impossible I may be asked to do some contract work later in the year for the same employer other than that I will not be actively seeking employment. Sorry do you mean sort itself out at the end of tax year or during the tax year 

TheSpectator

Mikey481 said:

TheSpectator said:

Mikey481 said:

TheSpectator said:

Was the agreed redundancy payment £15,000? If so the employer should have just paid you £15,000 without deducting tax/NIC. Was there any element of normal salary/holiday pay included in the £26,448?

Apologies I may have muddied the waters but using the “R” word. My employer was insistent as it’s politically sensitive that it wasn’t a redundancy merely an opportunity to leave for those (over 55)to take early retirement so normal redundancy framework would not apply. However to achieve the £15000 net which was on offer in my tax situation they have had to use the gross figure of £26448 to end up with £15000 net. Hope this makes sense. I will contact HMRC to sort

Well, that's a whole different story.

Essentially thectax situation will sort itself out - what is your future intentions employment wise?

Unlikely but not impossible I may be asked to do some contract work later in the year for the same employer other than that I will not be actively seeking employment. Sorry do you mean sort itself out at the end of tax year or during the tax year 

That's why I asked what your intentions were - if you were going to another job then you give them the P45 and the tax position would then sort itself out. Will you be claiming any benefits? 

Mikey481

TheSpectator said:

Mikey481 said:

TheSpectator said:

Mikey481 said:

TheSpectator said:

Was the agreed redundancy payment £15,000? If so the employer should have just paid you £15,000 without deducting tax/NIC. Was there any element of normal salary/holiday pay included in the £26,448?

Apologies I may have muddied the waters but using the “R” word. My employer was insistent as it’s politically sensitive that it wasn’t a redundancy merely an opportunity to leave for those (over 55)to take early retirement so normal redundancy framework would not apply. However to achieve the £15000 net which was on offer in my tax situation they have had to use the gross figure of £26448 to end up with £15000 net. Hope this makes sense. I will contact HMRC to sort

Well, that's a whole different story.

Essentially thectax situation will sort itself out - what is your future intentions employment wise?

Unlikely but not impossible I may be asked to do some contract work later in the year for the same employer other than that I will not be actively seeking employment. Sorry do you mean sort itself out at the end of tax year or during the tax year 

That's why I asked what your intentions were - if you were going to another job then you give them the P45 and the tax position would then sort itself out. Will you be claiming any benefits? 

I won’t be claiming any benefits. I think JSA would be the only benefit that I could access but as I won’t be seeking any employment I wouldn’t progress that. Thanks for the clarification 

Nomunnofun1

I’ve come across many net pay schemes but never a net compensation payment. 

Ultimately you will end up with a lot more that £15000 when the tax is ultimately sorted out. Presumably your former employer is content with that? They could, for example, have paid this in March which would have cost them significantly less. 

Mikey481

Nomunnofun1 said:

I’ve come across many net pay schemes but never a net compensation payment. 

Ultimately you will end up with a lot more that £15000 when the tax is ultimately sorted out. Presumably your former employer is content with that? They could, for example, have paid this in March which would have cost them significantly less. 

Absolutely it’s quite a unique situation I believe the intention was to pay it in March but there was not enough take up of the offer because of the position it would have put people in at end of tax year.
Yes your right it was not something I considered before I received my pay advice yesterday and realised how high the net figure was due to tax & NIC reported to HMRC but ultimately paid on my behalf by my employer. Yes they seem relaxed about it possibly hadn’t considered the true cost maybe but as a large employer with lucrative Mod contracts they are happy to soak it up but a win win for me I guess ballpark extra 5 K overpaid in tax to come back to me at some point.