Q And A
Tax on redundancy and maternity pay: ask the expert
I have worked for my company for three years and have been on maternity leave for five months. I have just been told that I am being made redundant and that my remaining maternity leave will be paid to me along with my redundancy pay and months notice. The company have said that as that gross amount comes to just over £6,000 I will be subject to the higher tax band. Is this correct as you don't pay tax on redundancy pay which for me is three weeks pay at £1,200? They have said this will work itself out, but I am assuming that wouldn't be until the next tax year.
Answer by Des Desai
I am afraid you are right on all counts. Your payment in lieu of notice is taxable. Your redundancy is not taxable under £30,000.
Any SMP you receive is also taxable. However, if you go back to work then your tax refund will come back at that point. If you do not, then you will have to wait until April 2013 to get the over payment.
Des Desai's company are tax specialists (one of my partners is an ex-Senior Inspector of Taxes) who exclusively serve self employed and buy to let landlords. If you are running your own business or intending to start one, they can give you practical down to earth advice on tax and benefits. Website: www.mrtaxsoftware.com Email: firstname.lastname@example.org