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Where Taxpayers and Advisers Meet

Redundancy: now or in the next FY?

agfoxx
Posts: 1
Joined: Mon Nov 12, 2018 1:23 pm

Redundancy: now or in the next FY?

Postby agfoxx » Mon Nov 12, 2018 1:25 pm

Hi forumites, I'm new here, and I'd be very grateful for advice.
Please don't take this as bragging, and please try and look past the figures, purely at financial implications.
So - here's the deal. I'm about to take voluntary redundancy after having been with my firm for 19 years. They owe me, all-in, £126K in redundancy money.
My current salary is £82K.
I have about 15 days of untaken leave which, if I took the money now, they would have to pay me for. If I stay on until the next FY, I'm supposed to go and actually use my leave. I won't get anything for it.
I can either
a) take the money now - this would allow me to start doing other work from January onwards,
or
b) stay in my current role but on "gardening leave" until the end of the FY, taking redundancy in April 18. The stipulation is that I can't work for competitors while on gardening leave, but I can do other paid work (e.g., teaching etc). I can also continue to collect my salary - as long as I'm available to do some ad hoc jobs as and when my bosses feel they need it.
From a tax perspective, I understand that if I take the money now, this £126K (less the £30K tax free) will be added on to my earnings this year so far - and so a greater percentage of it will be taxed at the higher rate. If I were to take the money next April, I understand that my total earnings would be starting from a clean slate = smaller tax purely on a redundancy but a greater tax on whatever I earn next year. My expectation is that my income next year will be around £60K.
If I took the money in April, I also lose out on the payment in lieu of leave.
Also - this idea of sitting on my hands, at my bosses' beck and call, but with no real job to do, is very frustrating. I've now been doing that for about two months, and I'm finding it really difficult. So I know that, psychologically, I'd much rather cut my ties with the firm now and move on.
But purely from a ***money** perspective, what is the better deal?
Thank you!

AmanSood
Posts: 215
Joined: Mon Jan 09, 2017 4:12 pm

Re: Redundancy: now or in the next FY?

Postby AmanSood » Wed Jan 23, 2019 12:13 pm

from the figures provided, it doesn't look like there will be any monetary difference in taking the redundancy now or next year. it would be worth however getting an advisor to do some scenario tax calculations to confirm this particularly given the potential tax at stake..
Advising on UK employment, expatriate and personal taxes
aman.sood@e-taxconsulting.com.
+44 (0) 207 846 0155

az0bcd
Posts: 1
Joined: Wed Jan 30, 2019 2:52 pm

Re: Redundancy: now or in the next FY?

Postby az0bcd » Wed Jan 30, 2019 2:58 pm

I'm not sure the advice is correct. I'm in a similar position however the numbers are the other way around (£124K salary with £68K settlement). My understanding is that anything over £100K in the tax year starts to remove the £30K tax free allowance.

So I'm trying to understand if I should work my notice (rather than take the PILON) which would take me into April. What I can't figure out is if this is the best way to do it as I'll be paying tax as per normal on the 3 months notice rather than accept the PILON.


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