help - tax on redundancy

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partnership

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I am trying to work out how much tax I will pay on a redundancy payment which I may be getting. All of it would be taxable as there is no statutory redundancy.

Figures - ex gratia payment of 137025
Service was 27 years or 25.5 years if career break not taken into account.
Future pension lump sum at age 60 of 79815

I have looked at the SCSB

Average salary over last 3 years 76720 x 25/15 = 127866.88 - pension lump sum 79815 = 48051.66 tax free portion

Taxable 88974.01

USC 8% = 7117.92
Tax @ 40% = 35589.60

Total tax 42702.52 leaving lump sum payment of 94318.15
Is there any way of lessening this payment do I have to use my pension lump sum now or can I choose to pay tax on that later. If I don't use that now my tax free is 127866.66 which means I am only paying tax on 9159.

Would appreciate any insights.
 
Sorry just wondering if I calculated the A part of the SCSB correctly is it the total remuneration of the 3 years or is it the total pay divided by 3?
 
First question is ...

How is there no statutory redundancy if you are there > 25 years?
 
I am a public servant paying a d stamp so the statutory part is taxable. I am there 27 years but took some time out on career break and shorter working year so 25 years.
 
OK fair enough

The SCSB calculations look correct to me

You may have some unused tax credits and/or 20% band which can reduce the PAYE slightly

The pension lump sum part is calculated as either

"amount of any tax-free lump sum received under an approved pension scheme, or the current value of any tax-free lump sum receivable in the future under an approved pension scheme."

so are you confident that you are using the correct figure as the current value of future pension lump sum may be lower than €79,815

Also if you took a career break then you may be able to use 27 in the SCSB instead of 25 so that would be

€76,720 x 27/15 = €138,096 less €79,815 = €58,281

Have a look at this leaflet

https://www.revenue.ie/en/tax-profe...ains-tax-corporation-tax/part-05/05-05-19.pdf
 
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Thanks db74. Doubt I have unused credits or 20 per cent rate have worked all year and in higher bracket. Figure for pension should be correct as it is preserved. I don't understand how I pay so much tax if you are allowed 200 k tax free as the combined total is only just over that. Don't understand tax at best of times except it is never in my favour. I presume if I got this at start of year may be better but that's not fair as timing not down to individual.
 
The timing of the redundancy is somewhat irrelevant, that would only really come into effect if you decided NOT to return to work after the redundancy

The way it works with your 20% tax band is that it is pro-rated over the year so by 31-Oct you will have only used up 10/12ths of your 20% band and also you will have only used up 10/12ths of your tax credits as well so you will still have 2/12ths available to use against the redundancy.

This assumes that you won't have any other income over the remaining 2 months of the year to use up those bands/credits

There is no €200K tax free limit or threshold when it comes to redundancy so I think you are misinterpreting something from the Revenue leaflet

I would still question the current value of the tax-free element of future pension lump-sum

If you are scheduled to receive a tax-free lump sum of €79,815 in say 2022 then that is not worth €79,815 in current value, it may only be worth €70,000 due to the time-value of money. You should be able to confirm this with the HR or Finance dept of wherever you work
 
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