Another tax question

[Lily]

I am getting my settlement payment in 2 separate amounts. I've just had my first payment through and i have been taxed a large amount which looks to be about 40%! I've asked HR to clarify but basically the agreement was 6 months' salary (net). If I am going to be taxed at 40% that will leave me considerably less than 6 months to live on! Is this correct? Would I be better off renegotiating for monthly payments? I am scared that they might not be around for that long though.

I don't now what to do!

[Derek Nimmo]

If your agreement clearly stated net, I'd have thought you need to speak to your lawyer ASAP. Hope it gets sorted quickly and easily.

[Kenickie]

I wouldn't renegotiate, and let your lawyer sort. It might be they have made an error on treating it as normal income rather than a voluntary severance payment.

[Flora Poste]

It might be because the PAYE system has assumed that the payment is your new monthly salary, so has taxed you on that basis (so thinks payment x 12 is your new annual salary) and has shoved you up a tax band - this has happened to both myself and Mr P when we got settlement/ redundancy payments and that was the reason both times. It does work it's way through the system and all come out in the wash eventually, either at the start of a tax year or when you start a new job and you get that tax back, as long as your overally salary for that tax year stays in your normal tax band.

Definitely worth keeping an eye on the amount though and running it past your lawyer.

[Topcat]

It could be as Flora suggests if it isn't the company cocking things up.

Speak to the solicitor and let them deal with the company, if they confirm that it is HMRC playing silly buggers then you should be able to submit a tax return online in order to obtain the tax back.

[Lily]

I am really worried about this. I think my lawyer has cocked up as the settlement amount was supposed to be 6 x monthly salary minus deductions. But the calculation they came up with was just over 6 months of my salary NET mius deductions.

[Lily]

NO hang fire, in the settlement a clause says that the terminaation payment can be paid without PAYE deductions. So it looks like they have just taken tax off it by mistake. Fingers crossed. I am realy panicking now! Have gone back to them and (politely) asked them for clarity. I feel so stupid on this, but I did think we had carefully checked the whole thing and caclulations (or others had)

[Derek Nimmo]

Why are you feeling stupid? They're the ones who fucked up if that's what the settlement says. I'd be feeling increasingly impolite (understatement) about the whole thing.

If they don't rectify immediately with an apology, hand it all off to the lawyer.

[Topcat]

You need to get your solicitor to do this and stop getting involved. It is what they are paid for.

[Morganna]

Mog speaks sense, Lils, which is not a sentence you see every day.

Something similar happened to me when I took VR, and M got a tax demand for something like £800k when he retired . In both cases we phoned them and it was sorted out. Mine took longer, as they had to believe that I wasn't getting paid for the rest of the tax year, but I got a rebate, and M pointed out that if he'd earned enough to pay £800k in tax he'd like to know why it had never made it to his bank account. They owed him £800 or something. We didn't have a lawyer on hand, but it was straightforward. In your position I'd get yours to make the call, and tell them that it's urgent.

[Lily]

Thanks all - panic over. They have cocked up. My lawyer has exploded with fury at their stupidity and fired off a fantastic email but he also told me I was clever for spotting the clause which made everything make sense.

I thought I was stupid because of numbers and misreading it and so forth. BUT I WAS RIGHT. Ha!1!