Redundancy and tax

[CAH706]

Suspect I know the answer but I'll ask anyway

I'm due a redundancy payoff & I'm trying to reduce the tax paid.

My pension is at the life time allowance already.

Do I have any options or is it a case of just paying the tax?

[Eric Mc]

Are you getting any payment that would qualify for the £30,000 ex-gratia allowance?

[CAH706]

The payout before tax will be c150k so I'm assuming 30k tax free and the rest taxed unless there are any options.

Additionally, I'm looking to draw my pension next July and won't be working any time soon if at all.

[Eric Mc]

CAH706 said:

The payout before tax will be c150k so I'm assuming 30k tax free and the rest taxed unless there are any options.

Additionally, I'm looking to draw my pension next July and won't be working any time soon if at all.

£30k is tax free if it's "Ex Gratia". If it is part of your employment contract as a payment expected on redundancy, it won't be tax free.

[CAH706]

It is ex-gratia.

[ellroy]

If you’re maxed out on the pension front VCT & EIS do offer some Income tax breaks, not at the same levels, and with undoubted risk, but worth at least consideration.

[CAH706]

Thanks ellroy, I will look into that

[Eric Mc]

CAH706 said:

It is ex-gratia.

That should be OK then. It's amazing how often this is forgotten or not properly recognised.

[CAH706]

Thanks Eric Mc

[FiF]

Don't forget if it happens very early in the tax year, as it did when I volunteered some years back to get the hell out of one particular sinking ship, you pay a stack of tax due to the way it's calculated. Claim it back later.

[CAH706]

Thanks FiF - I did wonder about that. I'll get it Jan or March I think

[omniflow]

CAH706 said:

Thanks FiF - I did wonder about that. I'll get it Jan or March I think

If you don't plan on working anytime soon (if ever) then I would push to take it in April. Then, assuming I could live on £150K after tax for a year, I wouldn't tap into my pension until the following April (except if my plan was to withdraw the tax free lump in one go). Obviously this assumes that you're earning money at the moment.

[scottri]

You don't have to wait to claim the tax back. I got mine in Dec a couple of weeks after submitting the form (p50) it took 10mins on my mobile so very straightforward.

Edited by scottri on Tuesday 22 September 10:32

[FiF]

scottri said:

You don't have to wait to claim the tax back. I got mine in Dec a couple of weeks after submitting the form (p50) it took 10mins on my mobile so very straightforward.

Edited by scottri on Tuesday 22 September 10:32

True, but then I walked into a consultant role for a while, so things got complicated. Ended up waiting to the year end and the self declaration sorted it out with a decent refund. To be fair didn't need the cash.

Actually student loan company were more of a hassle over parental contributions, but after a previous wages office cock up on basic and bonuses covering several years, which resulted in a fair few badly timed wedges of back pay I had experience of how to deal with SLC.