PAYE help

[Ilovemyshed]

Hi, anyone here a PAYE expert?

I've been made redundant effective end December and my pay to date including the closing package takes me well over into the 40% tax bracket (£120k total pay to date in 2023).

I start a new role in January, so am I correct in assuming that Jan to Mqr is going to be a killer on tax, but it will normalise back to standard 20% at the start of the next tax year?

Some of the redundancy package may not be taxable. First £30k of redundancy payment for example is non taxable.

If you do not need the money, then you may be able to ask your employer to pay a chunk of the taxable redundancy pay to pension, if you have pension annual allowance available. If that can be done as salary sacrifice even better as then saves Income Tax and NI.

New job will use figures from your P45, so yes Income Tax will be high on your first few months of pay.
Depending on what your salary is in the new job, you may then drop down to a lower tax band. Once past April 6th, check the estimated annual earnings figure for the job in Personal Tax Account to make sure that is accurate. If it is not, change it then, so HMRC can get a new tax code to employer by end of April or during May.

Each year is taxed separately so whilst ‘normalising back to 20%’ doesn’t make sense, it’s true to say that earnings in this tax year have no impact on next tax year so your earnings will reset to zero next year. As the PP said, if done if your 120k is redundancy, it won’t all be taxed. You get 30k tax free.

Thanks, yes, there is £30k ex gratia on top and I have already done a pension sacrifice. It was more just checking that each tax year is separate as my income will from here on into the lower bracket.