If you have been unlucky (or lucky depending on your point of view!) enough to have been made redundant in the past couple of years it is worth checking the amount of tax you paid on any redundancy payment you received. I have seen a few clients over the past month where they have had some of their redundancy pay taxed at 50% when they are 40% tax payers.
The taxation of redundancy payments can be complicated. In simple terms, the first £30,000 is tax free and the rest added to your income and taxed accordingly.
An issue arises when you receive a payment of over £30,000 and your ex-company pays it to you after issuing you with a P45. If they do this, you are taxed as if the amount over £30,000 is your monthly salary and with the way Pay As You Earn works, you may find you pay some tax at 50% when in fact you are a 40% tax payer, or 40% when you are a basic rate tax payer.
It’s always worth checking the tax you have paid in previous years as you can go back up to 4 years to claim a refund. After the 4 years the opportunity disappears so make sure you check sooner rather than later.
If you need any assistance with your tax issues, including self assessment, or have further questions, please contact us and we will be happy to help.