AIBU to think I might get heavily taxed?

[Ethicaldebacle]

Morning ladies!

Any accountants that can clarify this for me?

I was made redundant and they won't pay a lump sum, so I'll be part of their payroll through my notice (now gardening leave).

In case I get lucky and find a job soon, what would be the tax implications? They told me I'd have to tell the new HR team that my new role is my "primary job" but I'll effectively have two jobs, and I believe one is heavily taxed. So how would it actually work?

Thanks!

You'll pay income tax on all your income from either your new job or your old one. The rate depends on how much your total income is.

It'll be 20% on the first £37,700 and 40% above that, then it goes up again at around £125k, but I can't remember the rate.

There's bound to be an online calculator that can work it out for you.

Having said all that, I'm not convinced of the legality of paying redundancy pay monthly instead of in a lump sum. Might be worth looking into.

What's the question? As stated you will have two overlapping periods of employment and would be taxed in both. Stating you new job is your primary employment will move your tax code but you would be taxed by both and have to pay any tax shortfall or get a refund for tax overpaid if your tax codes aren't assigned correctly which usually is the case with two jobs.

It doesn't sound like redundancy? Have they actually used that terminology? It's sounds as though you've been given notice and they don't expect you to work. Redundancy is when the role no longer exists. Have you been asked to sign a settlement agreement?

Yes they called it redundancy and had a consultation period and everything even though none of it was necessary as my tenure was under 2 years

I have a 3 months notice, they're not making me work through it, but they also won't pay it as a lump sum.

You basically have two payrolls at the same time. Nothing rare with that. Lots of people have two jobs, or one job alongside a pension. You get one personal allowance and one basic rate band. So ultimately HMRC add all your income, deduct one allowance and charge tax on the balance at the appropriate rate. Whether you earn £25k each on two jobs or £50k in one job, in a tax year, your income tax bill is identical.

HMRC will probably keep your personal allowanc3 tax code with one employer and charge basic rate tax in full on the other. You can tell them which to apply your personal allowance to, or tell them to split it between employers. It’s up to you but you need to tell them what you want otherwise they decide. You also need to check that both employers aren’t wrongly giving you a full tax code and tell HMRC if they are. Best to communicate with HMRC rather than sticking your head in the sand and being landed with a big tax bill several months later.

I think you have got confised between a redundancy paymemt and PILON (payment in lieu of notice).

Sounds like they have refused PILON, which is thier right, and are making you work your notice period. You should also be getting whatever your redundancy payment entitlement is as a lump sum at the end of the notice period. I woild speak to HR to clarify what your entitlement is.

You don’t qualify for statutory redundancy if working less than two years. Hence being paid for notice period, but no redundancy payment.

If you have two jobs you pay the same amount of tax as one job, just that it is split, your redundancy payment is separate though and up to £30k is tax free

No, I'm not confusing them. I'm not being paid any redundancy money as I was there under 2 years. You're correct, they're refusing to do a PILON but I'm also not working (so for all terms and purposes on gardening leave).

I see you are not getting a redundancy payment as under two years so the under 30k will not apply in your case

My concern is that to HRMC it will look I'm potentially making £100k (which I won't) .

I don't understand this, you'll be taxed on what you're paid.

So if that is going to be 100k, then yes, you'll be taxed on earning 100k.

Or do you mean you'll be earning 2 salaries of 50k for a short period of overlap and you're worried HMRC will tax you on 100k for the whole year?

If so, they won't, if you're on PAYE it will sort itself automatically and you'll get a rebate if necessary.

It will be like people that take large sums out of their pension or have a large bonus, I don't know how long it takes for HMRC to catch up nowadays that this is not your monthly salary for the whole year.

Yes, the latter. Potentially for a couple of months it would look like I'm having a £60k salary and another £70k salary. Whereas realistically (again if I get lucky) it would be closer to £80k when you add all of my income within the whole fiscal year.

I would be more worried that your current employer will have terms and conditions that prevent you taking another job while you are on gardening leave, and will want to cease paying you if you take another job during gardening leave.

I asked that during the "consultation" and I had a friend as a witness, and they said it wasn't an issue.

PAYE is calculated on a cumulative basis. This means that once you’re overlap period ends, the new employer will calculate the PAYE due on the total income for the year, deduct th PAYE paid to date, and you pay the difference. You might end up with a couple of unusual months, but you shouldn’t end up with less net pay in the overlap months than you would have with a single job.

NI is different, because it’s charged on a monthly basis, rather than cumulatively. However, you still shouldn’t end up worse off than having a single income for the overlap months

That's cool, in which case, HMRC will tax based on what you have earned during the year. Unlikely your tax code will change until you hit a threshold.

If your current company are happy to continue paying you if you take up a new job during the notice period for which they are paying you then you will be taxed higher for the overlap period but you will actually have the two incomes. Once the notice period ends and they submit the P45 the tax will be adjusted and you will get a higher sum the following pay day and then goes back to normal so it sorts itself out .

You can also go online to your HMRC account and adjust the amount in your account for estimated income for the current employer to reflect what you will earn for them between April and leaving date too.

Oh good that makes me feel better! I've had it both ways where one year HMRC has owed me and one when I owed them, but I never really understood why.

You may need to check with your current employer to see if you are ok to work for someone else while on garden leave. Most companies don't let you as it's used to protect their interests

They've said they're cool with that. I asked for clarification on this.

If your total income from April 2025 to March 2026 inclusive is still under the threshold for 40% tax (£50,271) then you won't be heavily taxed in the long run, you'll just pay your standard 20% on everything over £12570 like everyone else. You might pay too much tax in the overlap month, if you get paid an amount in that month from both employments which is more than one twelfth of £50,271 - but it will be easy to claim it back, and the amount will e negligible if you are on an ordinary sort of income.

Eg if both your old and new jobs pay about £35,000pa but there's an overlap month where you get pay from both, you will appear to have an income of £70,000 for that month only. So your gross pay in that month will be £5,833 rather than the nornal £2,916 and you may have an extra £328 of income tax deducted which wasn't correctly due. However, you will still have thousands more than you do in a normal month, so no real harm done. At the end of the tax year the process for getting back the difference is not particularly problematic.

Do I have to due the maths myself or will HMRC do it?
Your example is greet, but the amounts are double that.

I can't advise on the tax codes, etc. side of things but if you're worried that once any overpayment of tax is sorted you'll still have paid a lot of tax, can you sock a bunch of your income into pension to get tax relief on it?