Redundandcy payments and tax
Discussion
If redundancy payment falls over two tax years, some years apart, how is the £30k tax free element dealt with regarding tax.
For instance, a total payment of £40K is paid as £10k in year 1 and the remaining £30k paid 2 years later.
I assume the payment in year 1 is tax free and 2 years later only £20k is tax free leaving a tax bill on £10k. Otherwise there is major scope for tax avoidance.
But as income tax is usually accounted for when the cash payment is made, is each tax year dealt separately and therefore both payment of £10k and £30 are tax free.
For instance, a total payment of £40K is paid as £10k in year 1 and the remaining £30k paid 2 years later.
I assume the payment in year 1 is tax free and 2 years later only £20k is tax free leaving a tax bill on £10k. Otherwise there is major scope for tax avoidance.
But as income tax is usually accounted for when the cash payment is made, is each tax year dealt separately and therefore both payment of £10k and £30 are tax free.
No, the payment is related to an unfair dismissal award. But, due to the particular circumstances of my case, part was paid by the employer a couple of years ago and the final part may be paid this tax year.
The award is taxed in the same way as a redundancy payment, hence my question.
But, having searched some more on the web, it does appear only one allowance is allowed and this can be split over tax years.
The award is taxed in the same way as a redundancy payment, hence my question.
But, having searched some more on the web, it does appear only one allowance is allowed and this can be split over tax years.
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