How to claim back tax on redundancy pay
Redundancy payments are tax free up to a total limit of £30,000. All amounts after that are taxed at the usual rate for the individual.
Always clarify what constitutes part of a redundancy payment with HM Revenue and Customs; for example, the value of a company car retained when your employment ends will form part of the £30k allowance. If you get a job or claim one of the taxable benefits such as Jobseeker's Allowance, you may need to wait until the end of the tax year or until the benefits cease before claiming a refund.
Contact the HMRC helpline or check the HMRC website for specific advice on eligibility for a tax refund from redundancy payments. Refunds depend on individual circumstances.
Download form P50 from the HMRC website and complete all parts of the form, including your National Insurance number; the PAYE reference number of your former employer and the bank account details for payment of the refund.
Include all of the necessary documentation with the completed form including parts 2 and 3 of form P45 and a letter from your previous employer to confirm any payments received since leaving. Post the paperwork to HMRC or hand it in at a local tax office.
Check your bank account for payment from HMRC once the refund notification or form P800 is received confirming the breakdown of the refund calculation.
Keep copies of all documentation for your records. HMRC may wish to check these if it decides to investigate your tax affairs in future years.
- Form P45 (Parts 2 and 3)
- Written confirmation from employer of any payments made after P45 issue.
- Form P50