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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 10401
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I earn approximately £70000 annually and have the

Customer Question

I earn approximately £70000 annually and have the opportunity to take voluntary redundancy at the end of September with a payment of £135000. I know I can reduce the amount of tax by paying a lump sum into my pension but is this the best thing to do?
JA: Have you talked to a tax professional about this?
Customer: No that is probably my next move once I have the full information and numbers.
JA: Anything else you want the Accountant to know before I connect you?
Customer: How much is tha charge for advice?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

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

Pension contributions, the aggregate of the employer and the employee's, is limited to 40K although you can go back three years to mop up unused contribution levels. This would top slice your redundancy pay the first 30K of which is tax free anyway. You will be well into the 45% tax bracket if you are not careful and if your taxable income exceeds 100K you will loose your Personal Allowance (PA) at the rate of a pound for every two quid over. Some calculations on the back of an envelope are clearly called for. If you can get some of the payment deferred until the next tax year this may help, but there is always the risk of your employer going pop in between.

Customer: replied 1 year ago.
No worries about the employer disappearing but would it be usual to ask them to defer payments?
Expert:  bigduckontax replied 1 year ago.

It often happens, perfectly normal.