Getting a job in the same year as a redundancy payment

Mad_about_tax

Hi there

I am about to be made redundant where the total payment (inc PILON) will be less that £30,000.

largley this will be mad up of a severeance package, PILON, unused hols & 18 months of pension contributions paid by the company.

Whilst i understand that PILON and hol payments are subject to tax, does anyone know what tax would be payable on the pension contributions?

Also, If i find a job within the same tax year as the redundancy payment...how is the tax free severeance money treated...is it still tax free or does it get rolled into what ever income I earn in a new job?

I hope this is clear...if not please ask any relevant questions.

Kind regards

Mad_about_tax

GARDINER

See

http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm05101510.htm

http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm05101570.htm

for details of taxation of refunded contributions. This is not available for refund as the purpose is to claw back any tax relief you have already had.

Severance will still attract £30000 exemption if you get new employment and will not be added to income

Debt_Free_Chick

Mad_about_tax wrote: »

largley this will be mad up of a severeance package, PILON, unused hols & 18 months of pension contributions paid by the company.

Could you clarify the position re the pension contributions.

Are you saying that - instead of putting 18 months contributions into the pension plan, the company are giving you compensation instead?

If so, then it's just a part of the damages you're getting for termination of the contract and it isn't treated any differently to the rest of the payment. The only different treatment is possibly the PILON, which might be taxed depending on your contract. Have you looked into this?

Mad_about_tax

Hi

The pension contributions were made by my company as a benefit and paid into the company pension. However, since my tenure is less than two years, they are apparantly giving me this money back. If i had been with the company for greater than two years then it would have stayed in the pension fund.

I am not sure if I must nominate a pension fund to put this money into (I do have other pensions that it could go to) or is it a cash lumpsum for me to spend as i see fit.

Any advice gratefully recieved.

Kind regds

Debt_Free_Chick

Mad_about_tax wrote: »

Hi

The pension contributions were made by my company as a benefit and paid into the company pension. However, since my tenure is less than two years, they are apparantly giving me this money back. If i had been with the company for greater than two years then it would have stayed in the pension fund.

I am not sure if I must nominate a pension fund to put this money into (I do have other pensions that it could go to) or is it a cash lumpsum for me to spend as i see fit.

Any advice gratefully recieved.

Kind regds

The company won't be giving you this money back - the pension plan will. Picky point, but important as it's completely separate to your redundancy/compensation package.

You will only receive your own contributions back and there'll be a deduction for tax. This applies to all refunds of contributions irrespective of the reason for leaving.

However, the pension plan should offer you an alternative, which is the value of your pension - including the value of the contributions paid by the company - for you to transfer to a nominated pension plan of your choice. This could be a (new) stakeholder or personal plan and need not be a new employer's scheme.

This second option might be more valuable in the long run - but the money would be tied up in a pension plan until you retire.

Perhaps wait until you get the letter from the pension plan administrators and then post again.

HTH

Mad_about_tax

Thank you very much