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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4329
Experience:  FCCA FCMA CGMA ACIS
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I have a decsion to make on whether to take voluntary

Customer Question

Hello
I have a decsion to make on whether to take voluntary redundancy on the 1st July 2017. Before i do I need to someone to tell me how much tax they think i will pay.
My redundancy payment will be £80,878. In addition i will be given 3 months leiu pay plus my final monthly wage. I earn 6924 per month gross. So my final paycheck will be 27,696. I understand i will be paid this on the 20th July 2017.
Im presuming my final paycheck will therefore be £108,574.
I understand that the first £30,000 of a redundancy package is tax free but am unclear on how the rest will be taxed. I would like someone to work this out for me.
Thanks
Tim
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

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

You are correct in your surmise that the first 30K of your redundancy payment is tax free leaving 50.878K exposed to Income Tax at your marginal rate. Assuming that you receive 108.574K on 20 July 2017 your employer will pass 70.574K through PAYE. This will immediately skew the PAYE system which will assume that this will be a regular monthly emolument for the remainder of the year and deduct tax accordingly thus over taxing you. If you go on to Job Seekers Allowance then normally the tax account will not be corrected until the end of the tax year in April 2018. If you are re-employed then the correction will take place faster. In the interim you can always ask your tax office to issue a refund of overpaid tax. They will not do this in full, bit you will get something back to improve your cash flow.

In any event 70.574K received in the tax year will be taxed as follows. Your personal allowance is 11K leaving 59.574K exposed to tax, 42.385K @ 20% [8744] and 17.189K @ 40% [6876] total tax 15.662K. This calculation takes no account of any other earnings in 17/18 which, in any event, will be taxed at 40%.

I do hope that you find my reply of assistance.