Tax on redundancy/settlement

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zippitydooda

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Hi experts!

I've recently been awarded a settlement from my awful employer on a serious equality issue - can anyone offer my some advice on tax efficiency? I've been in the job for 5 years with a high management level salary...what options do I need to look at for taxation?

Also - what are the implications of the pension choice (deferred pension scheme cash option vs waiver?) - is this waiving my entitlement to choose a lump sum on retirement? If so - it's hardly worth waiving as it appears to only save 2K in tax (according to my employers calcs).

Can anyone point me in the right direction to make sure I deal with this as tax efficiently as possible?

Thanks !
 
Thanks Clubman,

Seems the SCSB calculation benefits me best from a tax perspective...although I still don't understand the pension cash option - is this an option to take a cash lump sum from the pension now or on retirement? Anyone been through this before?

I may as well ask the Revenue after year end if I'm entitled to any top slicing relief (unlikely as I've always been on the higher tax band)?

Must talk to the Dept of Social Welfare too - until I can find another job...fingers crossed!

Am I missing anything obvious?
 
The pension lump sum is the current value of any lump sum you would be entitled to from this pension at retirement age. You'll have to ask your pension provider for this figure.

If this figure is high, you could opt to waive your right to the lump sum (in which case more money will go into providing your pension annuity at retirement age) and then, for SCSB purposes, treat the value of your pension as NIL.
 
afaik top slicing takes your gross earnings for the past three years and the amount of tax you actually paid (or were due to pay) and takes the average. its strips out all tax credits, cut off points etc so the result is a tax % of way below the 41%. probably around the 20/25% tops. so you will be able to have your payment taxed at this average. bigger the settlement the bigger the refund due from revenue.
 
Wow - top slicing should give me a decent tax saving then - thanks for that.

AFAIK the pension lump sum at the minute is tiny (only about 3K) - but seeing as though its a DB scheme I may be better off leaving well enough alone and letting the pension benefits sit in this DB scheme forever?

Not sure why I would take a cash sum now?
 
cuchulainn said:
afaik top slicing takes your gross earnings for the past three years and the amount of tax you actually paid (or were due to pay) and takes the average. its strips out all tax credits, cut off points etc so the result is a tax % of way below the 41%. probably around the 20/25% tops. so you will be able to have your payment taxed at this average. bigger the settlement the bigger the refund due from revenue.
Click to expand...


Would you know exactly how to make a claim re top slicing? Revenue website not clear. Do I have to submit my P60s for the past 3 yrs? Do I have to work out the tax/refund or will they? Is there any particular form that I must complete??

Thanks
 
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