okay i recieved a letter saying the following
You will recieve your salary for the period up to and including the day of this letter (13th Aug). In addition you are entitled to recieve.
One months notice from today's date in accordance with the terms of contract, a gross sum of £2000
A redundancy payment of £700, as an employee with 2 years continuous service
A payment of £553.85 in respect of 6 days holiday untaken as of the date of termination.
A total of £3253.85
they said they would look into whether the notice and redundancy can not be taxed, but the holiday pay would definatly be taxed.
So today I was payed £2359.31 now on my calculating if I was taxed on the full amount I should have recieved £2603.08.
So what should I do, its my first job since finishing studing and my first redundancy.
I'm keen to cut my ties from the company, do I call them, speak to tax people or CAB or even job centre staff
Sorry if any letters are missing my laptp is being a bit slow.
Oh and will I get a tax rebate??
thanks for any advice
From what I understand, only specific redundancy pay is tax free - any salary (inc notice)/payment in lieu of holidays etc is taxable.
Also bear in mind you may be entitled to a tax rebate at the end of the (tax) year.
Well for a start you've forgotten about NI contributions. As m_f says, only the £700 specific redundancy payment will be tax free.
as i understand it, only the redundancy element will be tax free. is the £2000 up top just pay in lieu of notice?
i've found my former HR department to be, um, not very good since i finished (although line management was very supportive).
I'm with m_f and aracer on this.
okay so i have to pay NI as well, great maybe even student loan. maybe i'll visit tax office to confirm, its all a bit confusing for me.
right i'm off to hand in a application, thanks for the help
Redundancy is tax and NI free, holiday pay definitely attracts NI & Tax. Payment in lieu of notice is more complex. Basically if you had no reasonable expectation of the money it is tax and NI free, i.e. if your employer gives you a lump above and beyond the redundancy payment which is not in your contract of service. This can apply to payment in lieu in some circumstances, mainly where there is no provision in your contract for payment in lieu of notice. When my wife was made redundant earlier this year she basically had to sign a waiver to say she didn't want to work her notice period. In return the employer gave her a lump sum that just so happened to correspond with her notice pay. Because it was outside of the contract terms (she had no right to pay in lieu of notice) the lump sum was effectively treated as additional redundancy and was therefore tax and NI free (company didn't pay tax or NI contributions on it either). Need to check your contract really. If you need to reclaim the tax you'll probably have to claim it back through the tax office.
All a bit complicated and really depends on how clued up your HR department is with the drafting of your contract in the first place (my wife's ex-employer was a major law firm who had an employment law department 😉 )
Stumpy - it sounds like they deliberately did that to avoid paying tax/NI. Would that (technically) be illegal?
Similar thing as stumpyjon describes was done for lots of people (including me) at my former workplace.
Technically legal but a bit of a loophole, as it was explained to me.
But my accountant says loopholes are only there because HMRC has decided not to close them, so there's nothing dodgy at all about using them.
Good luck tails.
That sounds extremely dodgy to me - not convinced HMRC would agree with the way they did that if they knew full details.
What stumpyjon says is right
if the money is contractual it's part of your salary & taxable
If it's just a lump sum for being made redundant - it's redundancy pay
The OP mentioned that his month in lieu was contractual - so that's taxable then
Tails - try this really useful net pay claculator (others are availble):
http://www.freelanceuk.com/money/paye_calculator.php
Put in the £2,000 notice pay and the £553.85 holiday pay, then your tax code and run it. Then add the £700 tax free redundency payment to the result and that should then match your payslip.
cheers scott I had a further look and inc tax, NI seem to be rightish guess the rest is student loan. ****ers fair chunk less than i had hoped, might as well take all go and spend it blowing up another 'axis of evil'. lets hope i get this crap half the wage i was on job to keep me going then, stll i might me some nic people.
Tails - keep smiling, I'm in the same boat and havn't had any joy after a 3 month job search (in a speacialist field so don't read too much in to it). I've now got to decide if I put the house on the line and try going self-employed...
The best job web-sites I've found are; reed.co.uk, monster and totaljobs. They seem to have the best hit rates/listings.
Good luck!