SMP, Redundancy and Tax

[DogsDontDoBallet]

I'm being made redundant at the end of December and DC2 is due in April. I am entitled to SMP and have been told that this will be paid as a lump sum in December along with my last months pay and redundancy money.

This has a fairly large tax implication for me as had it been paid in the next tax year as planned this would have fallen within my tax free allowance (am not planning to work at all during the 2013-14 tax year). However, paying it in December means I will be liable for full tax on this.

Do I have any options here? My employer is telling me that they have no choice but to do this as I will no longer be on the payroll after the end of the year. I spoke to the tax office but just got passed around and couldnt get any answers. It just seems a bit unfair that I will be paying £1,000 + in tax that I wouldn't be if I hadn't been made redundant. Any help appreciated

Well your employer does have a choice, if they mean in a legal sense, because of course there is nothing stopping a company making payments to whoever at whatever point, not just to people who are currently on their payroll system.

From an accounting point of view, because the payment is in respect of SMP due to you over a 9 month period, you could also say it makes sense to make sure the payments are made in the correct financial and tax years.

But what they mean is its much easier and less messy with their system to pay it to you while you are still on the payroll and do it that way.

I'm not sure whether there's a lot you can do about it really. It's not a question of refusing to accept payment.

What does your manager have to say about it? You really need to appeal to someone with a bit of discretion here, and your average payroll/HR bod probably hasn't got any.

Thanks Flowery, I will have a chat with my manager tomorrow and see what they say.