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I am being made redundant, and my redundancy payment is

likely to exceed £100,000....
I am being made redundant, and my redundancy payment is likely to exceed £100,000. I understand the £30K tax free element may be reduced in this case. How is that reduction calculated?
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Answered in 4 hours by:
3/7/2018
Sam
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Hi

It doesn't automatically follow that you get the full £30,000 exemption as it depends on how the £100,000 is made up

So please advsie how much is statutory redundancy how much is pay in lieu, holiday pay, commission or bonuses or any gardening leave and did you have a contractual right to receive this redundancy ?

I can then advsie further

Thanks

Sam

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Customer reply replied 4 months ago
It is likely to comprise approx 120K redundancy, 8k holiday pay, and 30k during gardening leave. I believe the 30K taxfree only applies to the first of these elements: as the question says, I was given to understand the 30K taxfree is reduced for payouts over 100K (as the 120K is). If this is so, how is the reduction calculated?

Hi

Yes you are correct in your understanding, but I had to be sure that you understood the relevance of what the £30K tax free could be awarded against.

There are new rules in the pipeline that will see this £30K exemption scrapped from April 2018 but this applies to those employer/employees who have manipulated the PILON rules (Pay in Lieu) - which from April 2018 has been taxable

So yours, as a genuine redundancy payment (and having the main element made up of redundancy which you do not indicate you have a contractual right to receive ) will continue to have the first £30,000 of it tax free and only the remaining £90,000 plus the additional £8K holiday pay plus £30K gardening leave (so £128K) will be liable to tax

The £100K limit you refer to has nothing to be with restrictions placed on termination payments but the threshold at which you start to lose entitlement to personal tax allowances (£1 for every £2 over £100k so at £123,000 this loses you all your personal allowances) but you can mitigate some of this by paying some of your lump sum into a pension plan (and you would need to establish what the maximum payment you have left for this year and any carry over available form the last 3 years)

This extend the basic rate band so in turn lessen the gross income position and they also create a tax refund for additional higher rate tax relief - so worth a consideration

Thanks

Sam

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