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If someone is getting 6 months in lieu of notice and it is

 
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  • Answered by:SamTax
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Customer Question

If someone is getting 6 months in lieu of notice and it is a large amount. What is the correct way to deal with this. The first 30K is not ni'able and taxable but should the rest be paid outside the payroll and a cheque sent to the tax office should this be taxed at BR or OT .
Thanks

 

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Province/Country relating to question: uk

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Submitted: 376 days and 20 hours ago.
Category: UK Tax
Value: £8
Status: CLOSED
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Expert:  SamTax replied 376 days and 19 hours ago.

Hi

 

Thanks for your question

 

All pay in lieu is liable to tax, and if not paid with the last salary payment, and instead paid as a lump sum after employment has ceased, should be taxed OT

 

The tax free £30,000 only relates to statutory redundancy, and other elements of any leaving package have to be considered as to whether they are taxable

 

Thanks

 

Sam

 

 

SamTax40998.5166176736

Customer replied 376 days and 17 hours ago.

Hi

The payment is part of a compromise agreement and the description has been given as compensation not Pay in lieu (sorry). The Solicitor has confirmed that the first 30,000. should be tax free and NI free for both Employees and Employers, can you confirm this.

 

But the pay in lieu that is taxable is 6 months worth and over 100,000.00 can this still all be paid in one tax period final pay?

 

Thanks

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Expert:  SamTax replied 376 days and 2 hours ago.

Hi

 

Thanks for your response and the additional information

 

Then the first £30,000 of the compensation can be paid tax free, but anything over and above will be liable to tax, as will the pay in lieu.

 

I am unsure what you are asking, when you state "can this still be paid in one tax period final pay"

 

When was/is your final working day, and when is it proposed that the lump sum payment is to be made.(as usually this is made after the employment has ceased, even if a day or two later)

 

Thanks

 

Sam

 

 

 

Customer replied 376 days and 2 hours ago.

Hi Sam

 

Sorry for not being clear, I am really asking if some of it is a payment in lieu for 6 months. Can the six months be paid in one tax period.

 

Thanks

Accepted Answer

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Expert:  SamTax replied 376 days and 2 hours ago.

Hi

 

Thanks

Yes - as its meant to be a single payment made, to represent the fact that you do not need to work the notice period as dictated to by your employment contract, or the agreed period of time.

 

Thanks

 

Sam

 

 

Expert TypeAccountant
Category: UK Tax
Pos. Feedback: 99.5 %
Accepts: 5985
Answered: 3/31/2012

Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax

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