Redundancy and taxation

New_one

Hi. Does any one know a quick way to calculate how much tax is paid on redundancy? Say 15 years service. 6 weeks per year and weekly wage 1200.
Thanks in advance

foundation10

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New_one

The package is 6 weeks for every year. 15 years service. So I calculate payment of approx 110,000. I know there is about 18,000 tax free, but how to calculate the balance.thanks

nompere

You'll need to read IT21 - http://www.revenue.ie/en/tax/it/leaflets/it21.html and get to grips with top-slicing relief.

You're looking at an average tax rate over the last few years. It's unlikely to be more than 30% - but it depends on your personal circumstances.

New_one

God top slicing isn't easy talk. Thanks for the reply.

Alan Shore

Hi,

Check http://www.revenue.ie/en/tax/it/leaflets/it21.html

Statutory Redundancy is exempt so €600 x31 = 18,600.

There is further relief under the best of 3 options. Yours is the probably the SCSB
The formula for calculating the SCSB is:

A X B / 15 - C

Where:

A is the average annual remuneration* for the last 36 months service to date of termination

B is the number of complete years of service

C is the value of any tax free lump sum received/receivable under an approved pension scheme.

So say your average salary was 60k with your 15 years service gives you an exempt amount of €60,000 less value of any tax free lump sum received/receivable under an approved pension scheme. You have not said if you are entitled to a lump sum or not so that needs to be taken from the 60k.

Top slicing relief will apply to reduce the tax suffered to the average tax for the last 3 years.