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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I've recently been made redundant and have received approx

Resolved Question:

Hi,I've recently been made redundant and have received approx 56k of which I have paid 9k tax on.
I went straight to a new job & in my first salary I've been taxed at least 40% as the tax payable for my redundancy is showing in this year!! Does this mean that I will pay tax at 40% for the rest of this tax year? Bearing In mind it's only June.
Regards
Steve
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

Can you confirm that the first £30,000 of the £56,000 was tax free and that only the taxable part of the redundancy payment, £26,000, was included in your P45 figures. What is your annual salary in your new job?
Customer: replied 1 year ago.
Yes the first 30k was tax free & handed in my p45 on first day to new employer.on my first pay slip with them it shows total earnings 2.8k income tax 1260 Ni 261 which gave me a take home of only 1.2k on my total to date it's showing Ni 261 income tax 12893 taxable gross 35022..... This is my first pay slip. So what does this mean for my earnings for the rest of the year?
Customer: replied 1 year ago.
Hi, have you got a reply for me please regarding my last message
Expert:  TonyTax replied 1 year ago.

Thanks.

I'm afraid the PAYE system isn't helping you. PAYE operates on a cumulative basis so in month 1 of the tax year, you are given 1/12th of your personal allowance and the balance is taxed at 20% if it is no more than 1/12th of the basic rate band. If it is more, then the excess will be taxed at 40% or even 45% if 1/12th of the 40% tax band is exceeded.

In month two of the tax year, you are given 1/6th of your personal allowance and the balance is taxed at 20% if it is no more than 1/6th of the basic rate band. If it is more, then the excess will be taxed at 40% or even 45% if 1/6th of the 40% tax band is exceeded. In month three, the fraction is 1/4 is used and so on.

The large taxable payment of £26,000 you received has effectively pushed you too far into the 40% tax band as it has been included in your P45 figures. What I can say is that as each month passes, your tax deduction will reduce as you are given more of your personal allowance and the basic rate tax band. By the end of the tax year, you should be square as far as tax is concerned.

Use the calculators here to compute your next months tax and NIC deductions. Use the calculator here to determine what the 2015/16 tax year end position will be.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.
Doesn't seem like its worth working if tax is going to be 40% what happens if I don't work for approx 5 months & then start earning again would I be taxed as though this is the 6 month or 2nd month example 1/4.
Thanks for your help.
Expert:  TonyTax replied 1 year ago.
Can you tell me when you started your new job please. What were the gross and tax figures on your P45?
Customer: replied 1 year ago.
Left my job on the 7th may and started new job on the 11th may.sorry dont have p45 as handed in.however clearly shows on my new pay slip balance total to date £261 Ni tax £12.893 taxable gross £35.022.thanks for your excellent help sorry to be a pain.just need clarity on if I'm going to be heavily taxed over the next few months or if I took a career break & came back in October what would the impact be on my tax from October.
Expert:  TonyTax replied 1 year ago.

You would be cutting off your nose to spite your face if you took a break. It's not as if tax is charged at 100% so if you stop work you will be out of pocket.

The fact that you had a large taxable sum paid to you early in the tax year has distorted your tax position but that will gradually rectify itself over the rest of the tax year. You will not pay more tax overall than you would if your total earnings were spread evenly over the tax year.

If you did take a break until say 1 October 2015, at the end of that month you would be entitled to 7/12ths of your personal allowance against your earnings to date and you would be paying less tax but that would be because your earnings will have been less.

Customer: replied 1 year ago.
Tony you have been most helpful! Thank you
Expert:  TonyTax replied 1 year ago.
Thanks and good luck.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15751
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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