Redundancy tax calculator

[Ndiddy]

Does anyone know of an online calculator that will show your likely taxable portion of a redundancy package?

 

[ginslia]

It’s usually quiet individual, but If you know the package on offer, you can work out the tax free portion from the formulas provided by revenue, citizens information etc for the 3 different methods:
1) basic exemption , or
2 increased exemption (if you haven’t been made redundant in the last 10 years), or
3) SCBC (hardest to calculate, but most beneficial if you’ve been in a job a long time on good salary)

the best answer from the above will be your tax free portion.

the statutory part is always tax free.

Example avg earning 1k per week, worked 10years, and no pension lump sum, and package =4wks per year worked (40k), then the basic exemption = 10,160+7650
increased= basic +10k
SCBC=52k x10/15= 34,666, so this is most beneficial, and balance is taxable.

gets more complicated the pension lump sums and waivers etc.

 

[Ndiddy]

Read up a bit on the reply....am I right to say option 2 and 3 means giving up pension tax free portion?

I have 10 years worked, but I plan to use the tax free lump sum from my pension at age 50+.
As I don't have very long service, does this mean option 1 is best?

As I will be taxed on most of the package, is it best to try and wrangle a leave date at the start of the year to utilize full PAYE credits if I plan to not work for the rest of the year?

 

[ginslia]

Depends what present value is calculated for the tax free lump sum. Is it more than 10k or even more than 17k? (assuming rest of numbers above are still accurate).
option1 is the smallest- but pension lump sum is ignored
option2 could be reduced below option1 if the present value >10k
option3 you can choose to ‘not waive‘ the pension lump sum here, if present value was less than 17k, this would be the best answer, but if present value >17k, then option1 is the best.

if you have any choice re leave date, then yes pushing to this year will allow you to reclaim any taxable portion against unused tax credits at year end- but if claiming job seekers or PUP, this income is also taxable.