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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 15914
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Good morning. I have been made redundant with a £90,000 redundancy

Resolved Question:

Good morning. I have been made redundant with a £90,000 redundancy package. They have paid this amount to me for this tax year at my request. This was done because last year my earninigs were £120,000 and I didn't want to go into the 50% tax bracket.
But the net figure looks low to me. I have checked with my financial advisor and their figure is a few thousand higher that what I received.
What do you think the net figure should be?
Thank you very much.
Submitted: 5 years ago.
Category: UK Tax
Expert:  Tony Tax replied 5 years ago.

Was the redundancy payment made to you after you had left your employer? When exactly was it paid? How much tax has been deducted? What was your official leaving date? Do you have a P45 for the payment with a tax code on it? If so, what is the tax code?
Customer: replied 5 years ago.



Paid on the 3rd April

What hit my account is

Holiday Pay = £2,769.24
Compensation Tax free = £30,000
Compensation Taxable = £30,000
Payment in lieu of Notice = £30,000

PAYE = (£29,561.66)
NI = (£933.30)

Net Pay = £62,274.28
Paid as £60,974.16 + £1,300.12

The Tax is based on a Month 1 Code ie post P45

Official leaving date 31/3

P45 not received yet

Expert:  Tony Tax replied 5 years ago.
If your official leaving date was 31 March, then the redundancy pay should be taxable in 2011/12 and the tax office will query any claim that it is taxable in 2012/13.

Post P45 redundancy payments are subject to a tax code of 0T Month 1. What this means is that the first £2,916 of the taxable element is taxed at 20%, the next £9,583 is taxed at 40% and the balance at 50%. This treatment was introduced on 6 April 2011 as prior to that post P45 payments were only taxed at 20% and employers were not warning ex-employees that they may have further tax to pay. You can make a claim for the excess tax to be repaid to you by completing a tax return or sending your P45 to the tax office.

Let me know if you have any further queries.
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