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TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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, I'm 55, worked and in a final salary pension(allowed

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I'm 55, worked for 37yrs and in a final salary pension(allowed retirement age 60) which is about to close. I have been offered redundancy made up of Statutory(£12.5k), Addition service pay & notice not worked payment.
The information I've been given is that being over 55 that I will not get the £30,000 tax exemption. Is this the case? Will I get any tax exemption? Total amount is approx. £70k

Are you being told that that you won't get any of the £30,000 redundancy exemption? What do you mean by "Addition Service pay"?
Customer: replied 3 years ago.

The information the company has given me states that " if you are aged 55 or over, HMRC may consider that you are retiring and as a result you may not be eligible for the full £30k exemption and only statutory redundancy pay may be tax free"

Addition service pay is the additional payment by the company as " extra financial compensation when being made redundant"


Leave this with me while I draft my answer.
I'm back.

I have to say that whist it is possible to take a pension and retire from 55, I have never read anything from an employer along the lines that you have explained, ie "if you are aged 55 or over, HMRC may consider that you are retiring and as a result you may not be eligible for the full £30k exemption and only statutory redundancy pay may be tax free". Whilst anything is possible, iIf HMRC took that view as a matter of policy at a time when so many people will have to work to 70 plus, there would be many complaints to MP's.

Your statutory redundancy of £12,500 will be tax free. Provided that you are not entitled to the additional payment because of a clause in your employment contract, you should get a further £17,500 tax free to take you up to £30,000. Any payment that you are contractually entitled to such as holiday pay will be taxable. If you are entitled to a period of notice but your employer decides to pay you to leave immediately and that is not stipulated in your contract then that payment will also be tax free as part of the
£30,000 tax free sum.

Take a look here, here and here for articles on redundancy pay which may give you some peace of mind.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.

Thanks for that, just to clarify, you believe that I would get the full £30k exemption and the rest presumably taxed at 40%.

I am planning to take the cash lump sum from my pension approx. 8 wks. later which will pay £17k per annum approx. Consultation period ends 8th April & I believe will have to work a further 4 weeks of my notice period, being paid for 12 wks.Currently earn £42k/yr.

If you are genuinely being made redundant and your employment contract mentions nothing other than statutory redundancy, you should get the first £30,000 tax free.

The rate of tax you pay will depend on your total income for the tax year in which the redundancy is paid to you but if you are on £42,000 per annum, you will pay tax on most of the taxable part if not all of it at 40%.

The pension rules change in April as you are probably aware but that fact that you are taking your tax free lump sum as is your right at age 55 should not affect the tax free redundancy allowance. See the first question under "Frequently asked...." here for more information and peace of mind.
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