Top Slicing - is this how it works

Thoie

Trying to get my head around top slicing.

(Figures are just examples) Let's say I was made redundant in 2008, with a taxed payment of 10,000 @42% (Taxed = 4,200)

Salary 2005 = 30000 - paid 10000 tax (excluding PRSI)
Salary 2006 = 30000 - paid 10000 tax (excluding PRSI)
Salary 2007 = 40000 - paid 15000 tax (excluding PRSI)

So my average tax rate over those 3 years is 35k/100k / 100 = 35%

(Am I right so far?)

In that case, I can request the Revenue to top slice my redundancy pay, which means it should have been taxed at 35%.

10,000 @ 35% = 3,500.

So I've overpaid 700 euro?

If you request that, do you just get a straight out refund of 700, or will you owe them the 700 later?

Is that how top slicing works?
Does it only refer to the lump sum redundancy, or does the 35% count for the entire taxable income of 2008?

ollyk1

Thoie wrote: »

Trying to get my head around top slicing.

(Figures are just examples) Let's say I was made redundant in 2008, with a taxed payment of 10,000 @42% (Taxed = 4,200)

Salary 2005 = 30000 - paid 10000 tax (excluding PRSI)
Salary 2006 = 30000 - paid 10000 tax (excluding PRSI)
Salary 2007 = 40000 - paid 15000 tax (excluding PRSI)

So my average tax rate over those 3 years is 35k/100k / 100 = 35%

(Am I right so far?)

In that case, I can request the Revenue to top slice my redundancy pay, which means it should have been taxed at 35%.

10,000 @ 35% = 3,500.

So I've overpaid 700 euro?

Correct. If you'd made an AVC for 2007 prior to leaving employment you should note that in addition to receiving tax/PRSI relief you would have reduced your top slicing rate and hence paid less tax on the taxable portion of your redundancy payment.

Thoie wrote: »

If you request that, do you just get a straight out refund of 700, or will you owe them the 700 later?

You request the relief be applied at the end of the tax year. So if you got paid redundancy in 2009 you would request the relief in early 2010.

Thoie wrote: »

Is that how top slicing works?
Does it only refer to the lump sum redundancy, or does the 35% count for the entire taxable income of 2008?

Yes it is.

Top slicing only applies to the taxable portion of the redundancy payment and has nothing to do with your regular income during the year.

JOL

Hi, I got stung for a levy percentage on my redundancy in 2009. I think it is a new type of tax the glorious government put in place.

You may get something back on this if they overcharged you.

It might be worth asking about this levy, not sure if it applies to your situation though.

newmug

Sorry for bumping an old thread, but this is relevant to me. How exactly do you go about claining top-slicing? And is there a time limit on when you can do it?