Is redundancy pay, tax free?

[mjn]

Having a discussion at work as to whether redundancy pay is tax free. When i was made redundant in 2006, i was taxed on my pay, but after looking on online it appears that the pay is usually tax free upto £30k.

[Bill Hicks]

correctamundo hombre! When I took redundancy back in 95 I didn't pay a single penny to her majesty!
I'd get in touch with the tax office asap, cos you should be entitled to that money back!

[booyaka]

generally yes - up to £30k is normally paid tax free.

http://www.hmrc.gov.uk/guidance/redu...-factsheet.pdf

Also tons of information here

http://www.berr.gov.uk/employment/em...15686.html#Tax

[krish]

Should be tax free, apart from of course your final month's salary and unused holiday

[mjn]

Originally Posted by krish

Should be tax free, apart from of course your final month's salary and unused holiday

That could be why i was taxed. Only been there 6 months, and got 1 month redundancy pay.

[unique]

http://www.customsandexcise.eu/guida...-factsheet.pdf

as others have mentioned, redundancy pay up to £30k is tax free, but anything over that amount you pay the tax on the amount over the £30k. there is no national insurance due either

you are liable for the appropriate tax and NI for any other payments, such as wages earned, unused holiday entitlement, bonuses etc, so it's normal in a final payslip for those amounts to show tax and NI deductions

[Crocodile]

You would also pay tax on any pay in lieu of notice.

[pjclark1]

Redundancy, pay on lieu of notice and unused holiday pay are all tax free (up to £30k)

When leaving a job you only have to pay tax on money paid for time you actually worked.
Others on this thread who have stated differently are wrong.
I think you only pay NI on time worked as well (but am not so sure on that)

pay in lieu of notice tax free here
http://www.emplaw.co.uk/researchfree...data%2f068.htm

[Crocodile]

Originally Posted by pjclark1

Redundancy, pay on lieu of notice and unused holiday pay are all tax free (up to £30k)

When leaving a job you only have to pay tax on money paid for time you actually worked.
Others on this thread who have stated differently are wrong.
I think you only pay NI on time worked as well (but am not so sure on that)

pay in lieu of notice tax free here
http://www.emplaw.co.uk/researchfree...data%2f068.htm

HMRC seem to think otherwise.

[dan1979]

I got taxed on everything (holiday, notice period) except the statutory redundancy pay.

[pjclark1]

Originally Posted by crocodile

HMRC seem to think otherwise.

That link shows an example where redundancy on its own is over £30k
Tax is liable on everything over £30k

[Squiffy]

When I was made redundant in 2005, I had my PILON (Payment in Lieu of Notice) which included unused holiday for the PILON period as part of my redundancy, so was tax free.

My final salary which included my unused holidays up until my termination date was taxes as normal.

[imightbewrong]

Originally Posted by pjclark1

That link shows an example where redundancy on its own is over £30k
Tax is liable on everything over £30k

But just to be clear, in the example, the first three items are liable for tax *regardless* of the redundancy payment - i.e. whether the actual redundancy portion is 1K or 100K, Salary, Salary in lieu of notice, and salary in lieu of holiday are taxable all the time.

[Crocodile]

Originally Posted by pjclark1

That link shows an example where redundancy on its own is over £30k
Tax is liable on everything over £30k

It's a poor example & really should be accompanied by an example where redundancy is under £30k.

Originally Posted by imightbewrong

But just to be clear, in the example, the first three items are liable for tax *regardless* of the redundancy payment - i.e. whether the actual redundancy portion is 1K or 100K, Salary, Salary in lieu of notice, and salary in lieu of holiday are taxable all the time.

That's always been my understanding with the caveat that if you can get your employer to play ball, as in I think Squiffy's case, it's possible for them to maximise the redundancy element & minimise any taxable PILON.

As ever with HMRC, it's a bit grey & relies not so much on how much is received but rather what it's called.

[ufitsy]

The way I interpret the rules it is also more benificial to be made redundant as early as possible in the tax year.