Tax on redundancy

strawb_shortcake

Had a surprise today and my employee has announced a voluntary redundancy scheme. 

I'm eligible but don't think I'd be picked, 

It looks as though if I was accepted and I'm not sure I'd want it yet, I'd have a lump sum of circa £75k, how can I work out what I'd take home of that? 

I'm 43, I earn just under £50k though around £51k with bonus and my last day of work would be 30th September.

I have no idea what I'd do instead, and it's a great pension I'd walk away from which is a large factor in me not being so inclined. I'd just like to be fully aware of all angles.

Thank you

Brie

Assuming it's the same as normal redundancy the first £30k would be tax free.  So the balance, about £45k?, would be taxable at the normal rates, which seems to push you into the higher tax bracket.  You can throw more into a pension scheme so I'd ask first how much they would allow you to put in your current company scheme.  

You say that the last day of work would be 30th Sept, I'm assuming that is 2026 so you have lots of time to organise all sorts.  And given that would be half way through the tax year I don't think that anyone will be able to give you a proper idea of how much tax would be charged overall as you potentially would have only earned about £25k from your job so maybe the higher tax would be on just £20k assuming you didn't earn anything until after 6 April 2027.

flaneurs_lobster

Isn't it rather unusual to announce redundancies nine months in advance?

Don't know what industry OP works in but when I've been involved in redundancy situations the usual aspiration (from those being made redundant, those employees remaining and management) is to get the whole process over with as quickly as possible (within the legal framework of notice/consultation periods).

strawb_shortcake

flaneurs_lobster said:

Isn't it rather unusual to announce redundancies nine months in advance?

Don't know what industry OP works in but when I've been involved in redundancy situations the usual aspiration (from those being made redundant, those employees remaining and management) is to get the whole process over with as quickly as possible (within the legal framework of notice/consultation periods).

Civil service, it's not being billed as redundancy more a voluntary exit scheme. In the CS 9 months is considered racy

lincroft1710

strawb_shortcake said:

flaneurs_lobster said:

Isn't it rather unusual to announce redundancies nine months in advance?

Don't know what industry OP works in but when I've been involved in redundancy situations the usual aspiration (from those being made redundant, those employees remaining and management) is to get the whole process over with as quickly as possible (within the legal framework of notice/consultation periods).

Civil service, it's not being billed as redundancy more a voluntary exit scheme. In the CS 9 months is considered racy

That is how I was able to leave the CS, Voluntary Early Retirement. From the date of announcement to date I was actually allowed to leave was 10 months.

monkey-fingers

If you think you can get a job quickly, take the £30k in cash, tax free.
Put the other £45k either into your pension (I don't know if the CS allow that) or open up a SIPP (that's a private pension) - Hargreaves Lansdown and ii allow you to do that online.

Although you pay tax and NI on the £45k, by dumping it into a private pension, you can claim it back.

bluebottle11

Hi, sorry to jump on this thread, but I have a question.

My redundancy pay is £38k of which I can sacrifice 8k to my company pension. I have savings which I can live off until I get another job. Given the remaining 30k will be tax free, I am wondering the best place to save it. I have a ShareSave scheme maturing which I will transfer to my ISA so all my ISA allowance will be used. Should I open a SIPP and put the 30k in there or am I not allowed as it is tax free?

MeteredOut

Once the money is yours, you can do with it what you want, so a SIPP is fine, and you might be able to get some additional tax relief added to your SIPP from that payment too, depending on your overall income/tax position.

But, are you limited to just £8K salary sacrifice?