This can't be right - tax / HMRC

[VenusStarr]

In brief, husband was put at risk of redundancy in March. They let him go at the end of April, saying they'd pay 2 weeks statutory redundancy plus 1 month of pay in lieu of notice, to be paid in June.

New job secured and started 15 May, filled in tax form to say no p45 (as not issued until final payment). Tax code has changed 3 times now and he's on one which is around £10500 personal tax allowance instead of the normal £12570 because of the extra payment from his old job which in effect was his severance pay.

He called HMRC yesterday who said its correct. But his annual salary is £32k but he's getting taxed around £700 tax deductions now when it should be closer to £400. Previous salary was £31k do not much difference but tax deductions are much higher now.

So he's getting penalised for losing his job and getting a tiny payout.

Is there anything he can do? It's not right it it?

If it is correct, can anyone explain it please?

Has he missed out on any pay? It doesn't look like he has from your post.

He's being taxed on his income - severance pay is simply income, surely?

Is he not on an emergency tax code because his p45 hasn't been issued?

Not on emergency tax code @Faz469

@VickyEadieofThigh is that why he's on a reduced personal tax allowance? Because its looks like extra pay? But he's not a high earner, so the extra pay would only put him to a maximum of £35k per annum and it was a one off payment?

I guess it looks like he had 2 jobs at the same time but he filled in the HMRC form to say I was in another job and have no p45

It's because he had 2 payments in a month. The 1275L code only permits 12 monthly payments anything outside of this will create an underpayment and a code change.

You do not pay tax on redundancy pay. Was it actually redundancy pay? Was the consultation process done etc? Or did he accept a buy out? Important distinction

Statutory redundancy is not taxable, pay in lieu of notice is. He needs to get his P45 from his ex employer - they are obliged to provide it to show the tax paid.

Not of any real help but I work multiple jobs and my tax code is always a bit meh. You do get any extra tax paid back the next year which doesn’t help if you are skint right now. I just got my tax refund so expect it July/ August next year.

Oh blimey @Badbudgeter yeh, could do with the cash now! Annoying.

I suspect its that @Summerrainstorminagain so frustrating.

@sheworksintec 2 weeks is definitely redundancy money, so shouldn't count, but around £1900 extra is a month payment in lieu. But in reality, he got it in June when he would've been paid had he worked during May. But they released him early. By that point though, he'd been in his new job for 4 weeks.

I'll get him to check his P45 and previous payslip to see the wording on it. I've not doubt he paid the tax @TitInATrance so it's frustrating that he's been effectively taxed twice.

I’m sure he has had the tax deducted, OP - if there was an issue with getting the P45 from his ex employer I do hope they paid it to HMRC! If not it’s their problem not DH’s.

Redundancy money is tax free up to 30k (one off payment)

I suspect that they're using a tax code which will recover the tax due on the PILON (pay in lieu of notice). Although PILON is taxable, it's not uncommon for employers to pay it gross. He needs to check the payslip for the month that included the PILON.

The difference between the 2 codes means that he's losing £2,070 of his personal allowance. A month's PILON at £31k is £2,583, so pretty close. The tax due on the PILON would be £517. The extra tax arising from the reduced code will be £414.

Of course, none of the above takes account of pension contributions, and they're not taxable.