Do you have to pay tax on your redundancy pay? If you’ve been made redundant and are getting redundancy pay, you might be wondering if you have to pay tax on it. But, some other parts of your redundancy package, such as holiday pay and pay in lieu of notice, will be taxed in the same way as regular income.
Does redundancy pay go through PAYE?
As with your normal wages, your employer should deal with the tax and NIC due on any taxable parts of your redundancy package under the Pay As You Earn (PAYE) system, but the exact treatment, and any action you need to take, will depend on the timing of the payment.
Is unused sick leave payable on redundancy?
A genuine redundancy payment does not include any amount paid in relation to unused annual or long service leave entitlements. However, it will include any payments in relation to unused sick leave or unused rostered days off. This excess is known as an employment termination payment (ETP).
How much tax do you pay on redundancy payments?
If your redundancy was considered genuine, you should receive your genuine redundancy payment tax-free up to a limit. The base tax-free limit for income year 2020 – 2021 is $10,989.
Is there a limit on superannuation redundancy payments?
payments made in lieu of superannuation benefits. Any payments that meet the conditions of a genuine redundancy are tax free up to a limit based on your years of service with your employer.
What is not included in a genuine redundancy payment?
Amounts included and excluded from a redundancy. Depending on your employment conditions, a genuine redundancy payment may include: payment in lieu of notice; severance payment of a number of weeks’ pay for each year of service; a gratuity or ‘golden handshake’. The following payments are not included in a genuine redundancy payment:
Is there a cap on redundancy payments for 2020?
As we are into a new tax year, if we assume you take no other employment then you are capped at £40,000 for 2020/2021 tax year. Fortunately that’s not the end of the story, as we are allowed to backdate contributions to previous tax years going back 3 years.
