Tax return question

[miniman]

I suspect the answer might be "it depends" but...

If one was to have a settlement / compromise payment above the £30k tax-free threshold, would the tax paid via PAYE on the amount above £30k typically appear in the final "total tax in this employment" figure on the P45?

[caiss4]

I've been here once. Things may have changed but I seem to recall that a notional (10%) of tax is deducted above £30k and should be included in total tax paid (P45).

Tell me how I know that it does not include all the tax liable at your marginal rate.......

Thank you HMRC.

[Countdown]

caiss4 said:

I've been here once. Things may have changed but I seem to recall that a notional (10%) of tax is deducted above £30k and should be included in total tax paid (P45).

Tell me how I know that it does not include all the tax liable at your marginal rate.......

Thank you HMRC.

That seems odd.......

My understanding is that you get taxed at your marginal rate, and it appears on your P45

[miniman]

Certainly the taxable pay to date and tax to date from my final payslip match the P45, however the Self Assessment site is asking for the tax paid on the taxable settlement amount to be called out and I have no idea how I would figure it out.

@Eric - how much to take away the pain?!

[Countdown]

(Actual redundancy pay - £30,000) x Marginal tax rate

[miniman]

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(Actual redundancy pay - £30,000) x Marginal tax rate

Marginal tax rate... i.e. highest rate paid?

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miniman said:

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(Actual redundancy pay - £30,000) x Marginal tax rate

Marginal tax rate... i.e. highest rate paid?

Yes (so either 20%, 40%, or PHPBD rate )

[caiss4]

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caiss4 said:

I've been here once. Things may have changed but I seem to recall that a notional (10%) of tax is deducted above £30k and should be included in total tax paid (P45).

Tell me how I know that it does not include all the tax liable at your marginal rate.......

Thank you HMRC.

That seems odd.......

My understanding is that you get taxed at your marginal rate, and it appears on your P45

Actually thinking back my P45 did not include any tax paid for the settlement payment over the £30k tax free limit. I didn't receive the settlement amount until the end of my official notice (around 10 weeks later; I'd been PILON'd) and then my ex-employer had deducted what seemed like an arbitrary 10% tax on the sum above £30k.

[Countdown]

caiss4 said:

Actually thinking back my P45 did not include any tax paid for the settlement payment over the £30k tax free limit. I didn't receive the settlement amount until the end of my official notice (around 10 weeks later; I'd been PILON'd) and then my ex-employer had deducted what seemed like an arbitrary 10% tax on the sum above £30k.

Did your final payslip match your P45?

[caiss4]

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Did your final payslip match your P45?

It was a good few years ago but I would assume that my final payslip did match my P45. The settlement payment was made outside PAYE with a side letter sent to HMRC detailing the payment and the deduction of tax. This was the root cause of the problem I had a couple of years later. I had relied on the relevant P45 and P60 information to complete self-assessment for two consecutive tax years in the belief that it captured all the payments I had received.

[miniman]

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miniman said:

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(Actual redundancy pay - £30,000) x Marginal tax rate

Marginal tax rate... i.e. highest rate paid?

Yes (so either 20%, 40%, or PHPBD rate )

In all seriousness, where does PHPBD rate kick in?

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miniman said:

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miniman said:

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(Actual redundancy pay - £30,000) x Marginal tax rate

Marginal tax rate... i.e. highest rate paid?

Yes (so either 20%, 40%, or PHPBD rate )

In all seriousness, where does PHPBD rate kick in?

Its £150k.

However thinking about it I'm not sure how the withdrawal of the personal allowance between £100k and £120k would be applied. A freind of mine always gets an invoice from HMRC after year end for a couple of grand (he's PAYE in 3 different roles) and some of that is due to the withdrawal of the allowance)

If your earnings were below £100k the above calculation applies. Over £100k you need the services of Eric

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caiss4 said:

Countdown said:

Did your final payslip match your P45?

It was a good few years ago but I would assume that my final payslip did match my P45. The settlement payment was made outside PAYE with a side letter sent to HMRC detailing the payment and the deduction of tax. This was the root cause of the problem I had a couple of years later. I had relied on the relevant P45 and P60 information to complete self-assessment for two consecutive tax years in the belief that it captured all the payments I had received.

I'm really confused as to why your Employer would do that - it bu66ers up lots of things, from both your point of view and theirs. If they've made the payment outside of their payroll system it won't appear on any of the RTI reports. if it doesn't appear on the RTI reports I'm not sure how they can record the payment they made to you OR the tax they've deducted from you. Potentially HMRC might come and chase you for underpaid tax.

Maybe they sent a post year-end EPS Anyhoo it seems a very complicated way of doing things.......

[caiss4]

Countdown said:

I'm really confused as to why your Employer would do that - it bu66ers up lots of things, from both your point of view and theirs. If they've made the payment outside of their payroll system it won't appear on any of the RTI reports. if it doesn't appear on the RTI reports I'm not sure how they can record the payment they made to you OR the tax they've deducted from you. Potentially HMRC might come and chase you for underpaid tax.

Maybe they sent a post year-end EPS Anyhoo it seems a very complicated way of doing things.......

HMRC and I had a detailed 'discussion' on the matter 2 years after the payment. Let's just say all was resolved in HMRC's favour

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caiss4 said:

HMRC and I had a detailed 'discussion' on the matter 2 years after the payment. Let's just say all was resolved in HMRC's favour