Redundancy Pay Tax Calculator

[hepy]

I am likely going to be made redundant in March next year, but due to long service, I will get a decent redundancy pay out.

Does anyone know of an online calculator where I can work out the impact of tax and NI on my redundancy pay out? I am looking at around £70k, so need to weigh up whether to pay off borrowing, stick some in a pension.

Looked online but can't seem to find one.

[edc]

Redundancy pay, not notice or holiday pay, are tax free up to £30k. After that you pay at your nominal rate. If the balance outs you in the next tax bracket then that is just the way it is. You can if available sacrifice into a pension.

[hepy]

edc said:

Redundancy pay, not notice or holiday pay, are tax free up to £30k. After that you pay at your nominal rate. If the balance outs you in the next tax bracket then that is just the way it is. You can if available sacrifice into a pension.

Thanks, presumably you also pay NI on any redundancy money?

[parabolica]

hepy said:

Thanks, presumably you also pay NI on any redundancy money?

You pay no tax or NI on the statutory redundancy payment. What is the 70k made up of? SRP + notice pay? Or are you being offered additional ex-gratis payment (enhanced redundancy)?

Be sure to understand the differentiation between redundancy payments and notice pay. Up to 30k of redundancy payments are tax free, but this applies only to statutory and any enhanced redundancy pay. If your notice period is paid in lieu of notice, this is taxed as normal.

So if SRP is £17k, plus ERP of £23k = £40k total, 30k is tax free, 10k is taxable. Hope that makes sense.

[hepy]

parabolica said:

You pay no tax or NI on the statutory redundancy payment. What is the 70k made up of? SRP + notice pay? Or are you being offered additional ex-gratis payment (enhanced redundancy)?

Be sure to understand the differentiation between redundancy payments and notice pay. Up to 30k of redundancy payments are tax free, but this applies only to statutory and any enhanced redundancy pay. If your notice period is paid in lieu of notice, this is taxed as normal.

So if SRP is £17k, plus ERP of £23k = £40k total, 30k is tax free, 10k is taxable. Hope that makes sense.

Hi, thanks for the reply.

My employer is paying me more than they have to (presumably statutory pay), so presumably this is enhance redundancy.

There is no payment in lieu of notice.

Sorry, I'm clueless on this, I've never been made redundant before so it's all new to me...exciting and scarey at the same time!

[parabolica]

hepy said:

Hi, thanks for the reply.

My employer is paying me more than they have to (presumably statutory pay), so presumably this is enhance redundancy.

There is no payment in lieu of notice.

Sorry, I'm clueless on this, I've never been made redundant before so it's all new to me...exciting and scarey at the same time!

Ah ok; makes sense as you know about the redundancy now but it doesn't take effect until next March, so presumably they are having you work your notice period.

You'll need to get independent financial advice, but generally speaking you'll have around £40k of the £70k payment to either divert into your pension (IFA will need to advise you on any limits RE annual or lifetime, as per your pension scheme) or do with as you will.

ETA: ask for a breakdown of the proposed payment so you have an itemised list of what that £70k is made up of; an IFA will then be able to tell you what your options are.

Edited by parabolica on Friday 2nd December 07:30