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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4416
Experience:  FCCA FCMA CGMA ACIS
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I believe HM Revenue & Customs may be double counting in there

Customer Question

I believe HM Revenue & Customs may be double counting in there tax calculation. I was let go from an employer, and my salary was just under £100,000 (£99,056), and I received a severence pay taht was taxed to the fullest extent by my employer prior to receiving it. And as the £99,056 was undertaxed, they are now adding both the salary and the severence into 1 and applying a new tax charge- I have shown them proof from my employer that the severence was not apart of the taxable pay for that year, as the employer had already taxed it to the fullest before releasing it to me. Is it legal for the HMRC to double tax me on the severence?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

The first 30K of a redundancy payment is tax free, so your employer fully taxing this was possibly an incorrect treatmment. However, any amount over this 30K is taxable at your marginal rate of tax and furthermore, as you will probably have gone over 100K of total emoluments, you loose your personal allowance at a rate of one pound for every two quid you go over the 100K so it will disappear completely once your income reaches GBP 121,200.

So for tax computational purposes it is perfectly proper for HMRC to aggregate your employment salary and your redundancy money less the first 30K thereof to derive a figure for the application of Income Tax. I suggest that you ask your tax office for a Form P800 which will fully set out their calculations for the 14/15 tax year. You can then check these and if necessary make an appeal against HMRC's computations which you do merely by writing a letter.

If this has happened in the current year then the matter will begin to resolve itself when your new employer uses your P45 to use against wages. However, if you have been severely over taxed in the current year it would be a good idea to take it up with your tax office in writing.

I do hope that I have helped to shed some light on your personal tax position.