Redundancy/higher tax

Sprinter24sharp

I’m due to be redundant at the end of the year.

Taxable income will be 56500 (to the date)

Severance is 95500 (30k tax free)

Anticipating a new job starting Jan where I will earn 17500 by end of tax year.

So P60 will show somewhere in region of 139000.

When I start the new job will I be taxed at the higher bracket ? Would making a contribution from the severance into my pension be worthwhile ?

Ideally I want 50k cash to pay for a house extension.

El_Torro

Assuming your new job and current job are PAYE then yes, you will be taxed accordingly as HMRC will know how much you have earned this year and assign the right tax code.

It's worth looking up what happens when your earnings are higher than £100k. Essentially you'll be paying about 60% tax on your earnings above £100k. If you can put enough in your pension to only have £100k earnings this year then that will reduce your tax significantly.

Brie

Some redundancy schemes allow a portion (all?) of the redundancy money to be paid directly into the company pension scheme - or at least I've seen that happen in the past. Assuming you like your work pension and are happy to have the money there that may be an option to look out for. Alternatively you might bump up your AVCs during your remaining months there.

monkey-fingers

I put £60k into my pension last year when this happened.

The effective tax between £100k and £125k is 60%.
You really need to get your income under £100k.

There are alternatives - you could open a SIPP and put £60k into it and claim back all the tax too.