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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I am based in Thailand and have been made redundant

Customer Question

Hello,
I am based in Thailand and have been made redundant by my UK based company and have been paid redundancy, but when I used an online tax calculator I get a different net result than my company. Could you please advise if the company calculation is correct, I have no other UK income, only severance and they gave me an OT tax code.
Details are;
Total taxable pay
Severance £184,998.66
Ex Gratia £ 10,500.00
Total £195,498.66
Tax calculated on code 0T, month 4 as follows:
£ 10,595.00 @ 20% £ 2,119.00
£ 39,405.00 @ 40% £ 15,762.00
£ 145,498.00 @ 45% £ 65,474.10
£195,498.00 £ 83,355.10
Your Ex Gratia payment was subject to national insurance contributions
The 195,498 is after the 30,000 pound tax free is taken out.
Using online calculators I get an extra 7-8,000 pounds as the net amount.
I would be grateful for your comment. Thank you.
Best wishes, paul coates.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello Paul, I am Keith, one of the experts on Just Answer, and pleased to be able to helpp you with your question. Firstly, the first 30K of redundancy payments are tax free and that amount subject to tax outside the scope of NI. Your late employers have clearly grasped that principle Ex Gratia Payments are, however, both taxable and subject to NI as you have been told. Trying to assess the position mid way through the year is a trifle complex as the waters ar muddied by it not being a full tax year. However, all is not lost for when you make your annual self assessment at the end of the tax year, you will have to do this in 2016 even if your don't routinely, it will al come out in the wash so to speak and you will be refunded any overpaid tax and, regrettably, billed for any tax underpaid. Indeed, if you start another job your new employers will use your P45 when they take you on and the position will begin to adjust immediately, though not much. Remember, once you breach the 100K in emoluments in any tax year you loose your personal allowance at the rate of a pound for every two quid over the 100K. This further confuses most on line calculators. To reduce your exposure to Income Tax you could consider making contributions to a private pension plan. There are limits, 40K this year and 50K for the previous three. If you have a SIPP you can go back 3 years to mop up any unused limits. Remember your employers payments into a pension scheme count against these limits. I do hope my reply has been of some assistance.
Expert:  bigduckontax replied 1 year ago.

If you have been outside the UK for less than 91 days in each and every tax year yoou may be able to claim tax back as a non resident. If you did not when you left the UK you should complete a Form P85 and send it to your tax office. On receipt HMRC will make you non resident for the tax year after your departure and furthermore split th leaving year into two portions, one resident and one non non resident. The form is available on the web and can be filed on line.

HMRC will then tell your employers not to deduct tax, merely NI which you need to keep your card stamped to use an old expression.

By the by I have a Thai wife!

Customer: replied 1 year ago.
HI Keith, thanks for the response. I will retire in the UK from this month and draw a company pension so my earnings will increase over the redundancy and I guess I will pay the top rate of tax on my pension until the new tax year in April 2016.
Looking at the redundancy deduction is it possible to estimate if the company has made the right calculation or, as you say, this is a very complex process?
For the non resident part I have only spend a few weeks a year in the UK and was given non resident status by HMRC.
I am also married to a Thai!
Thanks
Expert:  bigduckontax replied 1 year ago.
My first advice would be to negotiate with your employers with a view to staggering your lump sum entitlements across two or more tax years. That would generate significant tax savings as well as ease their cash flow! If, of course, they make these payments before you quit the Kingdom you could escape tax as a non resident.
I really must wake up: I see they have you on a 0T tax code so that you receive no personal allowance at all. You should take this up with your tax office and get it altered.
Your employer's calculation seems not far out except that they have not given you a personal allowance as your tax code is wrong and there is no indication of pay to date which further increases your liability.
Please be so kind as to rate me before you leave the Just Answer site.
Customer: replied 1 year ago.
Hi Keith, thanks.
Last question; I understand that due to the high payout I would lose my personal allowance, so I am taxed on all the 195k. Looking at the company calculation they only tax me at 20% for 10k and I understood that the 40% rate can in around 42k, so I am confused by this last point? Thanks
Expert:  bigduckontax replied 1 year ago.
15/16 tax bands are:
£0 - 31,785 - 20%
£31,866 - 150,000 - 40%
Over £150,000 45%
The 20% band is, of course, inflated by your personal allowance of 10,600 effectively increasing the band to 42,385.
Please don't forget to tell HMRC that you have returned home. They will the split the return year in tow, but a reverse of the system I told you about in my original reply.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3371
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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