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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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Sorry, this may be a email! I have worked for the NHS as a

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Hi, sorry, this may be a long email! I have worked for the NHS as a nurse and manager for many years and was given a compulsory redundacy notice on 22.3.16. This package consisted of a redundacy payment of£113,008.08 with 12 weeks notice pay and 7 weeks redloyment pay from 14.3.16 and a leaving date of 31.3.16. This was paid at the end of April. My taxable pay was £101513.30 with £30,000 non taxable. Total tax paid was £44198.96! Is this correct? One of my colleagues has been told she has paid at least £12,000 more than she should have. Both HRMC and elfs (our financial service) have been unhelpful and are blaming each other. My tax code at the end of my employment was 862L. As a result of redundacy I decided to take my pension. The first payment was acceptable but my tax code has changed and my August pay was horrible as I paid £599.40 tax on a gross of £1332.47! Is this correct? My tax code is now DM1 M1. Should I seek financial professional help and roughly how much would this cost? I am nearly 58 and do not want to work anymore. Can you offer any advice. I have completed a self assessment form but it looks like they are not going to do anything until 2017!
Hope you csn help,
Denise
Submitted: 7 months ago.
Category: Tax
Expert:  TonyTax replied 7 months ago.

Hi.

Can you tell me which tax year your redundancy etc payments are treated as being paid in, either 2015/16 or 2016/17 please. Is the £30,000 tax free payment part of the figure of £101,513.30 or an additional to it? Are you sure the tax code on your pension is DM1 M1 and not D1 M1? What figures have you included in your 2015/16 tax return? Can you explain what you mean by "but it looks like they are not going to do anything until 2017!" Did you receive separate P45s for your final salary and the leaving payments?

Customer: replied 7 months ago.
We were told it would be 16/17 to avoid a large tax bill. Total pay before tax was13513.30 so the 30k non taxable was on top of the 101. The self assessment form was for 16/17 and the only income I will be receiving will be my monthly pension. The only P45 I have recieved was for the final few months pay and redundancy settlement - dated 25.4.16. Sorry yes its D1M1. I clearly stated on the return that I will not be seeking employment.
Customer: replied 7 months ago.
Several of us have rang the tax office but they keep saying they are awaiting further information from the Trust.
Expert:  TonyTax replied 7 months ago.

Thanks.

Leave this with me while I draft my answer.

Customer: replied 7 months ago.
Thanks.
Expert:  TonyTax replied 7 months ago.

HMRC will not act on a tax return for 2016/17 as the tax year doesn't end until 5 April 2017.

You need to make a claim for an in-year tax repayment. Complete a form P50 and send it to HMRC with any documents it asks for. Keep copies of any paperwork that you send to HMRC. This will allow them to process a tax repayment for 2016/17 after they have verified the figures with your former employer if you are overpaid which you almost certainly will be because of the way that post P45 payments are now taxed through PAYE. In effect, many people will pay too much tax initially and will have to reclaim the excess. The old system which limited tax deductions on such payments to 20% means that many people didn't pay enough tax and by the time they got a tax bill, they had spent the redundancy or paid off all or part of their mortgage or used it for other purposes. HMRC had to write off many millions in tax.

As for your current tax code, if you look here, you will see that a D1 M1 code means that you are paying 45% tax on your pension. Call the tax office and ask them to change this to a D0 code which will reduce the tax charge to 40%. You will be a 40% taxpayer for 2016/17 as your income will be over £43,000. You are probably overpaid by about £11,000 on the redundancy alone., ie ignoring the pension.

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

Customer: replied 7 months ago.
Thank you so much, makes perfect sense.
Regards,
Denise
Expert:  TonyTax replied 7 months ago.

Thanks. Good luck with the claim.

Would you mind rating my answer before you leave the site please.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15838
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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