Tax on redundancy

gowayouttadat

Hi, i'm just looking far any info people have on the tax on lump sum payments that is rumoured to be introduced in the next budget?

Can anyone tell me what the consensus currently is? Would the lump sum be taxed at income tax rates or is it likely to be set up differently?

My bf's company are currently talking about outsourcing work which would mean he'd be laid off however he'd have the option of taking redundancy within the next few months or working on until next April and being laid off then. I'm trying to get as much information as possible to help make an informed decision. Obviously I know nothing has been introduced yet so it's hard to get exact details.

Edit to ask if people think redundancy payments will be affected by the taxation or if they'll focus on pension lump sums etc?

Kingkong

I could see some upper limit beginning imposed. To fully tax a redundancy payment would piss of the social partners, unions etc...

gowayouttadat

Ya I started reading up on it last night. I had head that they were potentially going to tax "lump sums". Seems to be related to pension lump sums though. I can't see how they'd tax redundancy as they'd be hitting people who are becoming unemployed. That's ok then. Makes decisions a small bit easier.

dearg lady

As far as I remember it's not as simple as it is or isn't taxed, it depends what it's made up of, ie statutory redundancy, or payments written into a persons contract or not. As I recall, statutory redundancy isn't taxable, the rest have more confusing rules.

Mr. Incognito

There are a host of possibilities.

As it stands- statutory is tax free.

Lump sum is tax free up to 10,160+ years of service increase, increased by SCSB and Top slicing relief.

As for pensions, in the main a lump sum can be paid tax free on retirement up to certain limits and the pensions sums themselves are taxable Schedule E emoluments.

Any guesses as to what could change are limitless.

gowayouttadat

Thanks. I know it's impossible to know 100%. I guess I'm trying to get an understanding of what the most likely situations are so that we can try and make an informed decision about whether it's best to go now or go next year.

Mr. Incognito

Redundancy won't change.

It's hardcoded into the legislation.

Income tax rates will however be increased.

Given a choice between getting laid off now and next April I know which one Id be taking.

It shouldn't be a factor tbh.

Nony

Does anyone know the tax implications of taking a 'separation agreement' from work, rather than redundancy? I know I obviously won't get the 2 weeks statutory.
6 weeks per year worked being offered. Is this taxed in the same way as redundancy, or entire amount taxed?
Thanks.

Mr. Incognito

Same gig- it's a redundancy payment by any other name- I'd fire a post into legal though, not sure if you can contract out of statutory provisions like redundancy, gut feeling is that you can't but don't quote me on that- ask your employer for clarification.

ballinloughan

Does anyone know if there is a definition for complete years of service? What if you worked for the same company but in two different tax durisdictions? Note company is recognising the time spent in both locations as years of service.


A x B

---

- C
15

where:

A = average annual income for the last three years
B = years of service
C = any lump sum pension entitlements

Mr. Incognito

It's defined as complete years of service- ie 365 days or 52 weeks.

ballinloughan

Thanks.
So does it matter if some of those yrs were in the US (paying US tax)?