Redunancy payment

geoffken

Apologies if wrong place.
Took early retirement in Sept 2001 with lump sum of £60,000.
Company /i.e. me paid 22% tax at the time.
IR have not come after me for the extra 18% on ammount over £30,000.
Have got it salted away in Egg account but when can I relax and spend it or should I spend it and if they come after it just ask them to up my tax take on PAYE.

THANKS

WHA

*YOU* had the legal obligation to tell the Inland Revenue about your higher rate tax liability. The UK has a "self assessment" tax system. That is what the law of the land says.

I would strongly suggest that you come clean immediately and tell the Inland Revenue of the position, so that the tax can be paid, and the inevitable penalties, interest etc can be mitigated.

If you don't come clean the IR could charge you upto 100% penalties on top of the tax and interest.

Debt_Free_Chick

Agree - you should have declared this on your tax return. Can't remember where, but it specifically asks you about severance/redundancy payments or "Payments for Loss of Office".

Best own up & grovel to avoid a lot of aggro ... expect to pay a penalty and/or interest.

geoffken

Thanks for this.
Not realy what I wanted to hear but there you are.
As I have retired now and my Tax affairs have always been with same co and tax office for 30 years and I was only 1 of 300+ who were made redundant/early retirement I did expect tax office to have system in place at end of year to asses total payments and issue tax amendments

Pal

This doesn't sound quite right to me. Presumably you were made redundant? Then the first £30k is tax free. Under PAYE your company should then have deducted tax on the rest at your highest rate based on your tax code at the time i.e. either 22% or 40%. Are you sure they only deducted 22% on the amount above £30k and not 40%? Apologies for doubting you!

The fact is that if you have been a 40% taxpayer since 2001 then you should be completing tax returns every year, and the IR should have sent them to you to complete. So either you were not a 40% taxpayer, or your tax office is being very slow about sending them to you! If you are still a 40% taxpayer they will probably catch up at some point, when they will send you all the returns since 2001 to complete in one go!

Alternatively, you might find it easier to contact the tax office and ask them what to do. They will no doubt send you the form for that year to complete.

Debt_Free_Chick

geoffken wrote:

Thanks for this.
Not realy what I wanted to hear but there you are.
As I have retired now and my Tax affairs have always been with same co and tax office for 30 years and I was only 1 of 300+ who were made redundant/early retirement I did expect tax office to have system in place at end of year to asses total payments and issue tax amendments

They do. It's called Self-Assessment whereby you own up to all your income, interest, lump sums, capital gains etc.

There is a statutory obligation on us all to notify the taxman of our income over the year. Sorry, but you'd best not suggest to the tax office that they should have assessed your income. The nationwide database that would be required to achieve this simply doesn't exist

geoffken

Thanks for this help.
I was a 22% tax payer ie earning approx £30.000 per year but with 2 years redundancy pay of £60,000 in Sept 01 I received approx 40,000 as lump sum with co saying 22% deducted and tax office would chase for the rest at end of tax year.
1 person I know chased down tax office immediately to get his tax paid as he was having various financial problems and needed to be sure of his position.

The rest of those I keep in contact with have heard no more


Obviously in first 6 months i.e. April sept earned 15,000
Redundancy £30,000 tax free
other 30,000 paid at 22% but total earnings for year would be
45,000 hence potential tax liability