Redundancy and childcare benefits

[bakingmummy21]

DH has found out yesterday he is being made redundant. We have 3 DC, one in school, one in nursery and one about to start nursery in March as I am going back to work after mat leave. We claim TFC and 30 free hours for our 3 yo and will be doing TFC for our 9mo.

DH’s employer have offered him a severance package including payment for holiday untaken, his 2022 bonus and redundancy plus his notice period and have suggested that they will pay all to him as lump sum at end Feb.

Whilst this is helpful financially, having it all paid at the end of this tax year will push his total earnings over £100K which is unexpected and means we would lose our childcare benefits. But actually that money is his future pay to cover the following months whilst he looks for a new job, it’s just all being paid in one go.

Does anyone know how we could get around this or how the lump sum would be treated? A portion of it is tax free as it’s redundancy but I’m assuming HMRC still count it towards your total earnings in the current year?! Could we ask his employer to defer the final payment to 6th April so it falls in the next tax year?

Totally lost and stressed out because losing TFC and 30 free hours will have a big impact on us financially with 2 kids in nursery at the same time as DH being out of work for an unknown period of time.

Also any advice on what happens with him not working because I know you have to be in work and earning a certain amount to claim the childcare benefits. Obvs he will be working again as soon as possible but we don’t know how long it will take him to find a job. In theory we could take our younger 2 out of nursery whilst he’s off but places are very hard to get and we’d need them back in as soon as he finds a job, plus them being off won’t allow him to intensively job search and attend interviews.

The first £30k of redundancy pay is tax free. Does that still get counted by HRMC as earnings?

Putting extra in Pension is good advice as then he can keep under £100k in one tax year. I hope he gets another job soon.

Thanks yes he put some in his pension last year as he was just over £100k due to a mistake with company bonuses and the previous year being paid a month late so two paid in the same tax year. But the thing is this year he’ll be way over because of the lump sum and if he pays it all into his pension and then doesn’t get a new job for say 6 months we might not have enough to pay our mortgage. Well we do have savings but the point is that lump sum is actually his earnings for the next 6 months or so and ideally we need to save it and use it bit by bit to live off…

Yes it’s a bit bonkers. DH has got an employment lawyer to look at the package offer and will ask their advice. I wonder if they may be able to defer the final lump sum. Otherwise he may ask them to increase the package to compensate for the loss of childcare benefits and see if that might work 🤷‍♀️

Just here to update on the outcome of this in case it’s useful for anyone. DH explained the issues to HR who were very understanding. They agreed to extend his employment / gardening leave by 1 month to end March and then pay his final severance in April therefore pushing it into next tax year. If DH gets a job soon (which I really hope he does) then we will probably be over the threshold for the next tax year but that will be a nice problem to have given we’ll then be banking the severance payment. Really thankful his company have made it relatively easy during this stressful time!!