How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3817
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

Mr A has been with his employer years. Mr A is on a

Resolved Question:

Mr A has been with his employer for 15 years.
Mr A is on a salary of £85k per annum.
Mr A is seeking voluntary redundancy.
Employer has offered Mr A a redundancy of £70k.
Please explain the tax implications for Mr A in relation to the redundancy pay of £70k?
Can Mr A do anything to reduce his tax liability on the redundancy pay?
Can Mr A benefit by putting some of the redundancy pau into his pension scheme?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Of the 70K redundancy payment the first 30K is tax free leaving 40K exposed to taxation at A's marginal rate, presumably 40%. A can reduce his Income Tax (IT) exposure by putting funds into a private pension scheme. Up to 40K can be so invested in the 16/17 tax year and if he has unused contribution levels he can go back three years to mop these up also. Remember that employer's contributions to pension funds count against the 40K limit also. I do hope that you have found my reply of assistance.
Customer: replied 1 year ago.

Is there difference on tax implications if the voluntary redundancy vs. compulsory redundancy?

The additional funds into the private pension scheme, to be tax exempt should it go directly from the employer, therefore, being inlcuded in tax computations as PAYE?

Just for my understanding, what is the tax laibility for the employer on the £70k redundancy payout?

Is there any other way to reduce IT?

Expert:  bigduckontax replied 1 year ago.
No, redundancy moneys are treated in the same way. It does not matter in which way payments to a private pension fund are made providing that the various annual limits are not breached. In either case it will all come out in the wash as it were at the end of the tax year when you make your self assessment tax return. Frankly there are few if any methods of tax deduction apart from pension contributions available to an employee and even these are being squeezed by the current government as a matter of policy. There are professional subscriptions, but these are small beer in comparison.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

Related Tax Questions