Hi,
I'm facing potential, redundancy in the near future and have been looking at the tax of potential redundancy payments. The package my employer is offering is 6+2 (6 weeks plus 2 statutary), and I am working for them about 15 yrs.
My understanding is as follows:-
1) Statutary sum is tax free, and calculated as (600 *2) * 15 + 600
2) Ex gratia payment (6 weeks per year), but is capped at 78 weeks.
Ex gratia payment would be best calculated on the scsb calculation ?
so say avg salary was 50k, then tax free element would be calculated as
(Avg salary/15) * number of years service
(50,000/15)*15 = 50,000
Ex gratia payment of 75k would make 50k tax free, with 25k taxable at 41%
Statutary payment = 18,600, no tax payable
Ex gratia payment of 75k
payment tax f ree = 50k
25k taxable @41% = 14750 after tax.
total lump sum = 18,600 + 50,000 + 14750 = 83,350 after tax payment
Would this be the correct approach ?
Any advice appreciated, need to get some fwd planning in train!