More than three million workers fear they’ll lose their jobs in the next year, says a recent TUC poll. If you are made redundant, remember the first £30,000 of compensation is usually tax-free, as long as it’s not contractual or made “as a matter of custom”. Benefits such as continued mobile phone or company car use are usually tax-free, too. But if your pay-off does fall foul of the taxman, “there are ways you can reduce the bill”, says Ali Hussain in the Sunday Times.
Ensure any payment is made after you’ve had your P45, so that if your yearly income hasn’t yet hit the upper earnings limit, you’ll only be taxed at the 20% basic rate. If you’ve spent long periods working abroad, you may be entitled to “foreign service relief”. If at least 75% of your total service, or the last ten years, were spent overseas, you could be exempt from tax, says Geraint Jones of FW Stephens. If you’ve been with the same employer for 20 years, of which 50% was overseas, you’ll also be eligible. And consider asking your employer to pay a lump sum to your pension fund, which will also incur tax relief.