Hello, I'm Keith and happy to help you with your question.
There is no problem here. The first 30K of a redundancy payment is tax free. Here is HMRC advice on the subject as there can be odd sums added to the compensation payment which may bring the total up over 30K, albeit unlikely in your case. I must say HMRC couldn't make it more complicated if they tried, it is only when you read the example that the meaning becomes clear! The 'EIM' quotes are HMRC's published information sheets.
'Before the £30,000 threshold (see EIM13505) is applied, it is necessary to add together all the payments and benefits within Section 401 ITEPA 2003 that are made to, or in respect of, the same person in connection with:
The same office or employment and
Different offices or employments with the same employer and
Different offices or employments with associated employers (see EIM13540).
The threshold is then applied to the total. This ensures that only one £30,000 threshold is applied for that total.
For example, a director is dismissed from two separate employments with associated employers, receiving £25,000 in each case within Section 401 ITEPA 2003. The aggregated total received is £50,000 and only one £30,000 threshold is available against that total.'
As I said I don't think you have to concern yourself about HMRC's caveats, your redundancy payment will be tax free. As an Australian would say 'No worries, sport!'
To clarify; My total compensation was close to £120k. I wanted to put £25k of the £120k into my pension as it would be tax free, otherwise I would have to pay 50% tax on the £25k, as my total income would be gone over £150k for the 2013/2014 tax year. Now the company has come back to me and has advised that due to the rules of the pension scheme, they cannot put the £25k into my pension. I am trying to ensure that I don't end up paying 50% tax on the £25k. As I am out of work I do not have a PAYE code.
Am I better off asking them to pay me the full £25k to me directly and I pay the tax and NI to the HMRC as a self employed person or can I get a new tax code even though I am not in work, but this will allow the company to take off the tax and NI from the £25k?
Ok so PAYE is the wiser route. Should I apply for a new PAYE code since the old one is no longer correct (there was car and fuel benefits as well as no personal allowance) I presume that since I am no longer employed by the company and out of work then I should have the 1000L PAYE code? Or should the Company tax me on an emergency tax code?