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Redundant Hit With New 50% Tax Bill

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Basic-rate tax payers who are made redundant could be forced to pay up to 50% tax on part of their payouts — and then face a lengthy wait to claim it back.

Although the amount of tax is not changing, HM Revenue & Customs is modifying the way it collects tax on redundancy payouts from April 6.

Experts warn this could be a major headache for those who receive larger amounts from their former employer.

Currently, redundancy payouts of up to £30,000 are tax free. Anything above this is taxed at 20% at source. Higher-rate tax payers will then have to pay the extra when they fill in their tax return — taking them to their marginal rate of 40% or 50%.

But from April, HMRC will automatically take up to 50% at source as it assumes you receive this income every month.

So if someone receives a £50,000 payout, the Revenue will assume you earn £240,000 — putting you in the 50% tax bracket. You will only be able to claim this money back when you fill out your tax return.

John Whiting, of the Chartered Institute of Taxation, says: 'This method means basic-rate tax payers who haven't found another job could have to wait up to a year to get their hands on their money.'

Hmm. A rather dubious article, but very typical Blighty mainstream politics at work here.

Better that 'tax' be held by the government anyways. Good luck getting your money back though.

One of my mates just got made redundant. Sh1t.

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Lets be honest though - the people getting huge payouts can afford to wait for their money.

I don't know anyone who's been offered more than 9k redundency.

It'll stop people splurging the lot on property too if it's delayed getting back to them.

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I think lower rate tax payers will cope just fine with this.

For a start they'll be getting a payout in excess of 30k. So if they're getting 40k, they'll only receive 35k and have to wait to claim the extra 3k. Or 40k from a 50k payout and wait for the extra 6k. It's still a huge amount for anyone on basic tax.

Of course, I hope people are aware of this change so they remember to claim it back. A few thousand is a huge amount to lose through ignorance.

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Lets be honest though - the people getting huge payouts can afford to wait for their money.

I don't know anyone who's been offered more than 9k redundency.

It'll stop people splurging the lot on property too if it's delayed getting back to them.

I got enough to be affected by this. 20% tax paid on the balance over £30k, and more due when I fill my next tax return. I guess the argument against that is the hardship it'll cause when I have to pay up :lol: (at 60% 'cos it puts me in Gordon Brown's super-tax bracket :angry: ).

Still, with a bit of tax planning it'll be another rebate next year :D

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How many years had you worked there?

About 33 months cumulative, between the company that headhunted me and the one that took it over last year and discontinued my project.

I was expecting redundancy pay of about two months. Delighted to get more than that.

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They shouldn't take any chances, just tax the full amount at 50% and let them claim the overpayment back later.

We don't want too many cash buyers do we?

any payment over 25K should be taken in tax anyway.

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They shouldn't take any chances, just tax the full amount at 50% and let them claim the overpayment back later.

We don't want too many cash buyers do we?

I suspect it was introduced to aid government cash flows ahead of the impending routing of public sector job redundancies, i.e. the government doesn't have to pay out 100% immediately, most shortly, the rest in 12+ months. With the amount of job that are liable to go this could be a big help to the government.

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  • 309 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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