And to add even more, if you are made redundant midway through a tax year you may also be entitled to a tax rebate, although in this scenario I doubt that applies.

@Chavman
That's statutory redundancy. Companies can choose to pay more and lots do.

It doesn't work like that PG; tax is based on average earnings to date each month (which is then annualised) and is more apparent on flexible incomes. Just because you've earned over your tax limit doesn't mean you've paid the right amount of tax, you may well have overpaid.

For example, assume you earn £2k per month, £24k per annum. After 10 months you've earned £20k, which is above the tax-free allowance as you said. Based on last year (£11.5k allowance) you would have paid tax on £20k less £9583.33 (tax allowance to that point). You would have paid £2083.33 tax up to that same point.

Now assume you are made redundant and don't earn any other income in the other two months of the tax year then you've earned £20k for the year.

£20k less allowance of £11,500 = £8,500 taxed at 20% = £1,700. You are now due a rebate of £383.33

As for the first £30k of redundancy being tax free that is still correct from my understanding.

Another way of putting this is with flexible income (usually commission). In the first month you may earn £3k. Your income to date is £3k and you are taxed on that less your monthly allowance.

So in practise you earn £3,000, less monthly allowance (£958.33) x 20% = Tax £408.33

Month 2 you earn £1000 (total income to date £4,000)

£4,000, Less 2 month's allowance (£1916.66) = £2083.34 x 20% = £416.67

You've already paid £408.33 so your tax in month 2 will be just £8.34

... and so it continues throughout the year.

The Dragon

Plenty of more time to get those football tips right for once!!!

Jokes aside, this guy is one of the best football analysts I've ever come across. His knowledge of the lower leagues, second to none. Enjoy a long and happy retirement.

That sounds about right PG. I haven't personally come across that situation but as long as the £41.5k is paid on or after April 6th (relevant) then yes you could get taxed and would then claim a rebate of it all. If you are paid at the end of the month (April in this case) then it could be seen as an average pay (£11.5k x 12). Tax would be heavy on that but it isn't a major concern either as the tax office (believe it or not) are quite efficient.

I was made redundant midway through last year and so I phoned the tax office to advise them I wasn't going to work again this tax year. They took my word for it and refunded my tax straight away even though there was still six months to go. I lived off my savings and did not draw my pension until (ironically) today, although I took my lump sum back in December.

With regards to a March redundancy then the additional £11.5k would be added to your income and taxed accordingly, probably partially or completely at a lower rate, depending on what you earned that year.

It should also be noted that if you decided to claim benefits then again these are taxable (JSA) however, if the same rules still apply as last (tax) year then you cannot claim benefits with savings of more than £16k anyway.