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Where Taxpayers and Advisers Meet

Redundancy and Early Retirement on same day

aircub
Posts: 2
Joined: Tue Aug 14, 2018 8:06 pm

Redundancy and Early Retirement on same day

Postby aircub » Tue Aug 14, 2018 8:16 pm

My company has told me that my office is closing next year October 2019 and the options are Redundancy or move to new office. When the office closes I will be 56 years and 9 months, I do not want to move so am also thinking about taking early retirement on the same day as redundancy. I want too make clear that the company have not given the option of early retirement instead of redundancy.

I have been told that you cannot have both because of tax reasons however I cannot see how it will affect tax as I am already a 40% tax payer and will get a good redundancy payment.

Is there something I am missing here?? Hope someone can help

JRG
Posts: 414
Joined: Wed Feb 03, 2010 4:40 pm

Re: Redundancy and Early Retirement on same day

Postby JRG » Wed Aug 15, 2018 9:54 am

Would I be right in assuming that you mean taking your work pension at the same time as taking your redundancy?
If so, that would depend on the rules of your work pension scheme. There may be some reduction in pension because you would be taking your pension before the normal pension age.

I was in the same position in 1999 when I took redundancy and my work pension several years before the prescribed pension age. I had no tax problems, When I completed my self assessment tax return for that tax year I entered both my work income and my pension income. There were no tax problems

aircub
Posts: 2
Joined: Tue Aug 14, 2018 8:06 pm

Re: Redundancy and Early Retirement on same day

Postby aircub » Sat Aug 18, 2018 8:28 am

Yes to your question, however the company are NOT offering any incentive to take pension early, I just wanted to take it at the same time. I realise that taking the pension early has financial implications as to the amount of pension, but I was not certain if there was any more tax implications apart form PAYE.

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

Re: Redundancy and Early Retirement on same day

Postby AmanSood » Sun Aug 19, 2018 9:10 am

Yes to your question, however the company are NOT offering any incentive to take pension early, I just wanted to take it at the same time. I realise that taking the pension early has financial implications as to the amount of pension, but I was not certain if there was any more tax implications apart form PAYE.
Hi Aircub

Yes there would be issues from an employer perspective if you take early retirement and redundancy on the same day. This is because HMRC can then argue that redundancy payment is actually an early retirement payment and treat this as subject to PAYE/NI in full. I would therefore recommend you don't take both on the same day. Instead, take your redundancy payout from your employer free of tax/NI up to £30,000. Then don't take your early retirement immediately, delay this for a few months and then retire.

Hope this helps.

Aman
Advising on UK employment, expatriate and personal taxes
aman.sood@e-taxconsulting.com.
+44 (0) 207 846 0155

JRG
Posts: 414
Joined: Wed Feb 03, 2010 4:40 pm

Re: Redundancy and Early Retirement on same day

Postby JRG » Sun Aug 19, 2018 6:19 pm

As I said in my previous post, when I retired I took my redundancy and my work pension at the same time, my first pension payment being paid the month following my retirement, and I had no problem with HMRC when I completed my Tax Return; though the rules may have changed since 1999. You could ask HMRC.


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