Tax on Redundancy payment

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sparkles08

Registered User
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Hi Everyone,

I hope I'm on the right thread - my partner has decided to take Voluntary redundancy from his job as they are moving location and he feels it would be too much hassle for him to relocate.
I'm mainly wondering about the tax issues regarding redundancy - he should be recieving €22,000 and he has never taken redundancy before (I don't know if this matters) will he be taked on the full amount he will recieve or only part of it and how much can he expect to be taxed??

Sorry for all the questions but we wold like to get the financial side of things sorted out so we don't get a big shock when the money comes through.

Thanks in advance
 
Re: Tax on Reduncancy payment

Have you/he read this Revenue summary guide?

[broken link removed]

There are some existing threads about taxation of redundancy payments which might be worth browsing/searching for too.
 
Re: Tax on Reduncancy payment

Yes I have had a look but I just can't seem to understand it, or else I think I know and then I read something else and get mixed up again.

Thats why I was hoping somebody would just be able to break it down for me.
 
Re: Tax on Reduncancy payment

sparkles08 said:
Yes I have had a look but I just can't seem to understand it, or else I think I know and then I read something else and get mixed up again.

Thats why I was hoping somebody would just be able to break it down for me.
Click to expand...

I depends how long he was employed in the company. He is entitled to statutory redundancy(SR) and the company may also give his a golden handshake (GH) for all his hard work. SR is tax free anyway so if its all SR then its tax free and he'll get the full 22K.

Say the 22K is made up from 5K SR and 17 GH. Again the 5K is tax free. Of the 17K he will be entitled to receive €10,160 tax free plus an additional €765 per year of service. So if he worked there 10 yrs he can get 10,165 + 7,650 = 17,815 tax free. This covers the full 17K above so no tax is payable.

This is a simplistic calculation but that's the bones of it.
 
Re: Tax on Reduncancy payment

Am investigating this for myself at the moment, as in the same boat as your husband.

On your first redundancy or retirement payment, the higher of the following will be exempt from tax:

Basic Exemption (Already Discussed)
Increased Exemption
Standard Captial Superannuation Benefit (SCSB)

Increased Exemption
If you are not a member of an occupational pension (superannuation) scheme or if you irrevocably give up your right to receive a lump sum from the pension scheme, the basic exemption (€10,160 plus €765 for each full year of service) can be increased by €10,000. The increased exemption can only be claimed if you have not made any claims in respect of a lump sum received in the previous 10 years.

If you are in an occupational pension scheme, this increased exemption of €10,000 is reduced by the amount of:

Any tax free lump sum from the pension scheme to which you may be immediately entitled:

OR

The present day value at the date of leaving employment of any tax free lump sum which may be receivable from the pension scheme in the future.


SCSB (Standard Captial Superannuation Benefit)
This relief generally benefits those with high earnings and long service.

The basic formula is

(AxB/15) - C where:

A: Is the average annual remuneration for the last 36 months service to date of termination
B : Is the number of complete years of service
C: Is the value of any tax free lump sum received/receivable under an approved pension scheme.

Again, there's in's and outs to it, but thats the basic formula.

If your husband is getting any salary or wages in lieu of notice, there may also be relief/exemption unless the contract of employment provides for a payment of this kind on the termination of the contract.

This should give you an idea of what the figures are, but bear in mind, without knowing a person's exact personal circumstances, it is very difficult to give any more than just basic outlines, as the there are terms and conditions which apply to each of the above.

Hope this helps.
 
Re: Tax on Reduncancy payment

Ok! Answer a few questions for me..... How many years has your partner been in employment with the company he is receiving the termination payment from? Is he a member of any occupational pension scheme? (I.e Is he in any pension as a result as a result of Schedule E employments?)

If he is a member of an occupational pension scheme what is the actuarial value of the lump-sum payment he is entitled to upon meeting all requirements of the pension scheme?

How many years has your husband been in service with his current employer?

What where your partners earnings for the last 36 months prior to the month in which he received his termination payment?

Your partner will also get top slicing relief.....

Private message me if you don't want to give these details online...
 
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