Redundancy pay and tax

[5harp3y]

Hi All

Set to be made redundant at the end of the month and due to my length of service the pay out is quite good (in my eyes)

I have also secured a new role that starts in December with a new company and as such will not have to eat into the redundancy money at all.

Now I know that the first 30k of the money is tax free which is great but i'm unsure of what i can do with the remaining amount to esnure i dont pay too much tax on it.

Any advice on what remedies are available?

[okgo]

Likely put it in your pension is the only obvious one.

[LeoSayer]

Pension is the obvious answer.

Just bear in mind that, as well as the first £30k of a severance payment being tax free, the remainder doesn't attract NI so the salary sacrifice benefits (if relevant to you) are not as big as they are with normal contributions.

The best approach might be to do large sacrifices from your earnings from your new job until the end of this tax year.

[Collectingbrass]

Depends how immediately you need access to the money. If the job in December is definite and secure for the medium term then pension. When I was made redundant in March 2020 (thanks Covid) I was told if you might need access to the money sooner than retirement, or if you max tax free pension contribution, Premium Bonds would be worth looking at.

NB, I'm not a Financial Advisor, I just swear at cars regularly.

[SoliD]

As mentioned above any redundancy payment won't attract NI. Best bet is pension and obviously depending on your wage you need to be careful not to fall into the 100k tax black hole with starting a new job, as said above might be worth increasing your pension contributions when you start your next job and slowly burn through your 30k tax free to minimise your tax exposure over this and into next FY.

[softtop]

Depending on your marital status, you can plough money into your partner's pension so double bubble.

[Badda]

softtop said:

Depending on your marital status, you can plough money into your partner's pension so double bubble.

And important that you do plough it in.