Redundancy pay - tax question

[Roollie]

Hi,

Wondering if anyone can help me? Or if there is somewhere better to post this.

Currently going through redundancy process, very likely I will be made redundant and due to being on mat leave I am assuming they will pay me notice in lieu and not expect me back to work my notice.

I am currently part time and earn just below the tax threshold. If they pay me my notice in lieu in one payment along with all holiday I am due I will be over the tax threshold maybe even into the 40% tax bracket for this one month.

Anyone know what I can do? I'm not sure how it will be fair for me to pay 40% tax when usually each month I don't earn enough to pay any.

Thank you

I'm pretty sure the first £30k of redundancy pay are tax free.

It’s not redundancy it’s pay in lieu of notice and taxable. OP you’ll need to wait for pay and then contact HMRC - you can claim back (theoretically) by submitting a form. Worst case (which happened to me) is waiting to the end of the tax year.

The tax can be claimed back as they balance it out over the year.

You will pay higher National Insurance and Student Loan. This can't be claimed back. To my knowledge

Ah thanks everyone.
Yes was the notice pay I was talking about not the actual redundancy pay.
Thanks again 😊

Pay in lieu of notice is taxable, but unless you are on a week 1/month 1 code, tax is calculated on your cumulative pay, not on a single month in isolation, so it is highly unlikely you will end up paying 40% tax. That would need a payment in excess of £15k over your normal monthly pay. Even if you are on a week 1/month 1 code, you would only get into 40% tax if the payment was over £3k more than your normal monthly pay.

You are correct that NI is non cumulative, but this will either make no difference to the OP, or it will be beneficial, it will not be to her detriment. Depending on what the amounts are she may benefit from paying NI at a lower rate over a certain amount, whereas if she had received the pay over a number of months it would all be at the standard rate (over the allowance).

As another point, they need to pay you the rest of your statutory maternity pay, and you may be able to negotiate about any remaining occupational maternity pay. Mat pay can be offset against notice pay though, so it's another area to try to negotiate.