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bigduckontax
bigduckontax, Accountant
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I have been made redundant. I want to ask the most tax

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Hi there - so I have been made redundant. I want to ask the most tax efficient way to take a final bonus payment.There was a 'retention bonus agreement' in place which meant if I stayed 3 years, I would receive $200,000 (but in the £ equivalent). Given that they have terminated the role & I had done 13 of the 36 months, they have agreed they'll pay $68,000 of the money.I am on £65,000 per year + company car allowance of £7,200pa.They are proposing that we:* complete the 3 month notice period
* we complete some essential work to make the hand over easy
* upon completion of the 3 months, we are paid 3 months extra in bonus
* the $68,000 will get paid as an additional to the bonusI'm thinking that this $68,000 + 3 months (£16,250) is going to all be taxed at a high rate of 40%. If I ask them to put it all in my pension, does that mean I avoid paying this tax?
Customer: replied 8 days ago.
Hi there - so I have been made redundant. I want to ask the most tax efficient way to take a final bonus payment.There was a 'retention bonus agreement' in place which meant if I stayed 3 years, I would receive $200,000 (but in the £ equivalent). Given that they have terminated the role & I had done 13 of the 36 months, they have agreed they'll pay $68,000 of the money.I am on £65,000 per year + company car allowance of £7,200pa.They are proposing that we:* complete the 3 month notice period
* we complete some essential work to make the hand over easy
* upon completion of the 3 months, we are paid 3 months extra in bonus
* the $68,000 will get paid as an additional to the bonusI'm thinking that this $68,000 + 3 months (£16,250) is going to all be taxed at a high rate of 40%. If I ask them to put it all in my pension, does that mean I avoid paying this tax?

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

 

One point to bear in mind is that pension contributions aggregated between employer's and employees'cannot exceed 40K or 100% of wages whichever is the lesser although you can go back 3 years to mop up unused contribution levels. Otherwise, your proposals are sound, but remember the first 30K of a redundancy settlement is tax free anyway.

bigduckontax and 2 other Tax Specialists are ready to help you
Customer: replied 8 days ago.
Thanks! Ok I'll do that then
Customer: replied 8 days ago.
So the company has said that because there is outstanding tasks to do, there is essentially a contractual obligation to carry out, hence they cant make a redundancy payment, it must be a bonus. Is this true?

Sounds tome as though you are getting the run around.

Thank you for our support.

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