Increased exemption from income or SCSB?

beetlebailey

I'm being made redundant and I’m being asked to choose either Increased exemption from income or SCSB.

can someone explain the difference please? Basically I’m 10 years with the company and have made pension contributions.My redundancy payment is modest enough so l want to pay as little tax on it as possible, I would rather pay it on my on my pension instead.

Which option do I choose?

thanks.

ari101

https://www.revenue.ie/en/employing-people/what-constitutes-pay/what-pay-includes/lump-sum-payments.aspx

The SCSB generally favours, longer service and higher salary, esp in final three years.

The increased exemption is good if you have lower service/salary.

Basic: 10k + (765*years service)

Increased: Basic + an additional 10k

If you are getting a pension lump sum or have had a lump sum in the last 10 years the additional increased exemption 10k must be reduced by that amount.

SCSB involves getting your average salary for last three years and dividing by 1/15th. Take this figure, multiply by years service, and then deduct any necessary lump sums.

You need to sit down and work out what suits your situation. Might be worth asking your company to assist you in calculating the better option as part of your redundancy, if they won't do it in house ask them to pay for someone to advise you.

beetlebailey

Thanks , so say 9 years service on average industrial wage….then increased exemption would be best option to pay least Amount of tax?

Tbh I thought I’d pay 0 tax on anything less than €50000 as I’ve never received a redundancy payment before.

ShelbyInc

Say your average salary was €45k in the final three years of employment.

basic exemption = €17k

increased = 27k

SCSB = 27k

Theres not much difference between the increased exemption and the SCSB exemption in the above case.I think increased exemption is slightly more favourable by €45.

Certain other payments are tax exempt too, like retraining costs paid by employer (up to €5k).

Make sure you allow for any breaks in employment you’ve taken during the relevant employment and only factor in full years of service.

For increased exemption, if you are a member of an approved pension scheme, make sure you include the present value of the future lump sum payable to you. If the value of this is €10k or higher then you do not qualify for the increased exemption. If it’s lower you’ll benefit from a partial increased exemption. If you are not entitled to a lump sum from an approved pension scheme then you qualify for the full increased exemption.

beetlebailey

https://www.boards.ie/discussion/comment/118833919#Comment_118833919

Thanks for your help

jfor

Hi,

A question someone may be able to help with please. When calculating SCSB the last 36 months income is used but for me the first 6 or those 36 months were in the UK. The company I'm being made redundant from acquired the company I was working for during those 6 months. Can the 6 months income in the UK be used as part of the last 36 months income for SCSB calculation?

Thanks,

J

Aidan17

What if your salary was €93k averaged over the last three years and you had 40 years service, with a Full pension. NPV of pension lumpsum comes in at around €120k. No previous redundancy payments claimed. It looks like SCSB, retaining the option for a pension tax free lump sum is the way to go but I would hate to make the wrong choice.