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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4181
Experience:  FCCA FCMA CGMA ACIS
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Iam being paid a grossed up settlement from my ex employer

Customer Question

Iam being paid a grossed up settlement from my ex employer and am wondering if I can pay some or all of it into a personal pension to avoid paying tax and NI
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

Hello, I'm Keith and happy to help you with your question.

How much is this redundancy package, please and of what elements does it consist? Is it redundancy pay of cash in lieu of notice for example?

Once I know this I can assist you further.

Customer: replied 3 years ago.

This is p[art of the settlement that I wanted paid into my pension as an AVC, but my ex employer forgot to do this before I left (unknown to me).

Subsequently, I asked for a pension estimate and noticed that my AVC fund was short by £30000.

Having now chased this up, the only resolution is for the business to now pay me a grossed up sum circa £48000 outside of the PAYE system

Expert:  bigduckontax replied 3 years ago.
I am so sorry to be a pest, but if you look at HMRC Advice Sheet EIM12800 you will see that there are simply scores of types of settlement payment each with a different tax treatment, hence my edited question.
Expert:  bigduckontax replied 3 years ago.

Your options regarding AVCs are, in any event, limited. Pension contributions, including your employer's, firstly may not exceed 100% of emoluments. Furthermore the maximum contribution level allowed in 14/15 tax year is 40K [in 13/14 it was 50K and unlimited save for the 100% rule in prior tax years]. Penalties for exceeding these limits are horrendous so you are well advised to check the position before investing further pension funds.

So sorry to have to rain on your parade.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.
Thank you for your support.