Redundancy Payment

dan_91x

Hi everyone,

I am trying to figure out how to calculate the tax for someone who has received a redundancy payment (unfortunately not cover in Personal tax level 4 AAT). To my knowledge the first £30,000 is tax-free but I find the redundancy calculation slightly confusing. As the redundancy payment was received after the termination date, I assume the amount of redundancy is NOT included in the P45?

The redundancy payment was received after leaving the job. To give an example


P45: Gross £175,00 Tax deducted £67,000
Tax Code in P45 is 0T.

the letter states the following "you will receive, less applicable tax and employee NI deductions required by law, the sum of:"

A sum of £120,000 (includes any statutory redundancy payment) ...
A sum of £10,000 as part in lieu of statutory consultation ...
A sum of £20,000 in lieu of the base salary ...less applicable tax and employee NI deductions as required by law

How would you calculate the tax owed to HMRC?

Would it be like this:
= 175,000 (Employment Income)
+150,000 (Total redundancy payment)
- 30,000 (Less Exempt amount)
- 0 (personal allowance)

= 295,000 Taxable income

Tax Computation:
Basic rate: 37500*0.2= 7,500
Higher rate: 112500*0.4= 45,000
Additional rate: 145000*0.45 = 62,250

Tax liability = 117750
- 67,000 Less Tax deducted at source:

Total tax liability to HMRC:
£50,750

Any advice appreciated!
Many thanks