holiday pay tax situation when made redundant

pologirl

hi there
I have a question that I hope someone tax minded can answer.
im due to on maternity leave soon and theres strong rumors of redundancy at our place, thing is I have a massive stack of holidays built up, will I pay extra tax on these now? if im told during my mat leave that im been made redundant. can I ask to take them at the end of maternity leave?
I don't mind been taxed extra on the provided I get in back with a p21 balancing statement at the end of the year, but will I be entitled to tax back on holiday pay part of redundancy,
?
awful stressed and worried about this

Nody

Holiday pay is the same as any other pay for tax purposes.

pologirl

thank you very much for taking the time to response, but what does this mean? ie. will my holiday pay be taxed higher than it would be if I had taken the holidays as normal? suppose im asking should I take some hols before going on mat leave which works out best financially?

Stheno

If you take the holidays as e.g. a paid month off in September then you pay tax as normal.

If however you are made redundant and the holiday pay is added to your last months pay, you will pay additional tax on them as they are extra pay in the month on top of your regular salary

pologirl

thank you stheno, do you know will I be able to claime a tax refund on the extra paid? if so do I have to do it in the following year? I don't mind one I know I will get extra I paid back at some stage

Stheno

pologirl wrote: »

thank you stheno, do you know will I be able to claime a tax refund on the extra paid? if so do I have to do it in the following year? I don't mind one I know I will get extra I paid back at some stage

No you won't unless you are made redundant prior to the end of the tax year and don't work so build up additional credits.

Essentially if you have a months worth of holidays and you get paid for them as you are leaving you are getting an extra months pay which is fully taxable.

Most efficient optiion here is to take the time off

pologirl

thank you stheno, I appreciate your responses, im sorry but I must enquire from you again, I hope you done mind.
so if this happens mid year and I don't work until the following year I will get a refund? is that what your saying? will the refund be purely a build up of tax credits (from me not working until the the following year or tax back from the overpayment of the tax on holidays aswell?

Stheno

If you get made redundant at e.g. the end of June, and do not work for the rest of the year then you will have six months tax credits built up, for which you can apply for a refund for at the end of the year, assuming you have paid more tax than those credits total to.

You will not get a refund against the extra tax on your holidays, rather on unused tax credits.

pologirl

thank you stheno, im disappointed to hear this, im hoping against hope your wrong, would revenue be the best place to double check your findings?

Stheno

pologirl wrote: »

thank you stheno, im disappointed to hear this, im hoping against hope your wrong, would revenue be the best place to double check your findings?

I guess so, or you could ask in taxation on here.
I'm not sure what you don't get, if you get paid two months pay in one month due to being owed holiday pay, why do you think you should get the tax back?

I get bonsuses on a quarterly basis, and pay 52% of the total bonus every time I get one, and no I don't get refunds.

Same situation applies to you

pologirl

thanks stheno,
I do understand your post now, I just thought that I should only pay the same tax on my holidays regardless of when I took them ie normal tax not extra, I just didn't want to take holidays before the baby was born would rather have this at the end of my 26 weeks, when my baby is here, if you know what I mean.
I didn't realise I would be out of pocket by doing this. I thought it would all even out with a tax refund

Stheno

Yes as I said above your best/most efficient tax option is to take the days off and be paid for them.

That incurs the lowest level of tax that you will pay.

Mrs OBumble

If you got made redundant at mid-year, then you would get a big payment then which you would pay a lot of tax on.

If you were then unemployed for a number of weeks (8 I think), Revenue would write to you offering a way to access the "overpaid" tax earlier by using the tax credits that you'd accumulated during those weeks.

I'm not sure if being on maternity beenfit (which is taxable) might change that procedure, though. You may have to wait until next year to ask for the P21. But this may be irrelevant. Companies generally don't make people redundant while they're pregnant or on maternity leave. I think it might even be close to illegal to do so (obviously some exceptions, like if the whole company is wound up). So if you are made redundant it's most likely to be at the end of the ML.

However if you got another job later in the year, when when you transfer your tax-credits to that job you should receive the "overpaid" tax back there.

In general, the most tax-efficient thing to do is to spread your income as equally as you can over each year:
- If you think that you won't earn very much next year (eg because you don't plan to work), then it's good to defer payment 'til then.
- If you think that you won't earn very much this year (eg because you'll be on MatBen for a lot of it) but will be back working (somewhere) next year, then it's good to get the payment this year.

jimmycrackcorm

AFAIK you cannot be made redundant whilst on maternity leave.