Redundancy payment taxable amount

GuitarHero73

Hi, I’ve just been made redundant and only 3 years away from retirement.  I understand that the first 30k is tax free but unsure what to do about the rest.  Someone had mentioned that there may be a way to reduce the amount of tax by possibly opting to put the remaining about into an ISA.   Is this right?  I could place the rest into my pension but I’d only get 25% of it as a drawdown.  Just looking for some clarification on what options I’d have.  Thanks

Isthisforreal99

You won't avoid paying tax on it by paying it into an ISA but any investment returns would be tax free.

Why would you only get 25% of it from a pension? 25% tax-free maybe and depending on yoyr circumstances you may pay less tax on pension income vs receiving it as taxable redundancy if the redundancy payment took you into 40% tax for example.

Mark_d

You can't reduce your tax by putting money in to an ISA.  The money is taxable at the point the money is paid out to you by your former employer.

Given how close you are to retire why wouldn't you want to pay this into your pension, reclaiming the tax?  Yes only 25% would be completely tax free but the other 75% would enjoy tax free growth - so that's no worse than using an ISA.