Redundancy and tax

S

Shades

Registered User
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Hi,

My partner has just been told his role is being made redundant. Technically his employment will end in January but his last day in work will be in October. We're trying to work out how to ensure we keep as much of the redundancy payment as possible.

I'm aware of the P50 which will recover income tax paid that tax year. Does this only recover tax paid in that tax year, i.e. January only, or can it be used to claim back tax paid in previous tax years? Can the P50 be filed this year before the redundancy date in January?

The redundancy agreement says the company will pay the various payments in the most tax efficient manner - would we be better getting it all paid in 2015 or 2016 or split somehow?

My partner is on the 40% tax rate and I am unemployed signing for credits.

Thanks for your help.
 
it all depends on how much he is getting paid

Statutory is tax free

anything above stat then he may be best waiting until 2016 to take advantage of the reduction in USC

Most companies won't split it as normally in the small print will be a clause saying they reserve the right to cancel it up until his last day
 
The rules around termination payments are a little more complicated that that - how many years has he worked for his employer and how generous are the terms of redundancy?
As a rule of thumb, under SCSB (look it up!) you get roughly a month's pay per year of service tax free. Only amounts greater than this are potentially liable to income tax.
I don't think the payment could be split over years.
 
Thanks guys. Only 3 years service (nearly 4) at around €50,000 a year. Total redundancy payment is about €24,000 including €5,000 statutory. SCSB is less than the Basic Exemption I think by my calculation. Worth checking though!

I think we never joined the pension scheme (foolish I know) but that means the "Basic Exemption plus Increased Exemption" entitlement comes into play. An extra €10,000 tax free on top of the basic exemption. Does anyone know any downside to this, other than having no pension :eek: ?
 
Regardless of being paid to January, your termination date for the P50 and your P45 is end of October. This has been discussed a few times on AAM. The day you physically leave is the relevant date.
There is no option for the company to split it between tax years, otherwise it could not be treated as a termination payment.
 
JoeRoberts said:
Regardless of being paid to January, your termination date for the P50 and your P45 is end of October. This has been discussed a few times on AAM. The day you physically leave is the relevant date.
There is no option for the company to split it between tax years, otherwise it could not be treated as a termination payment.
Click to expand...

That may not quite be the case here. The OP says that "technically his employment will end in Jan" but his last day in work is October. That to me suggests that rather then being allowed to work out a notice period (and many companies will have policies that require them to give a notice period before redundancy" he is being put on gardening leave, in effect, he is being paid for 2-3 months to sit at home. That would be quite common in American multis
 
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