I have a client who was made redundant on 31st March 2017 from her local council job and received a sizble redundancy payment of £76,247.77. She also had the foresight to pay the maximum she could into a pension on 4/4/17. All her redundancy paymentswere received before 5th April.
However, she decided to take early retirement as she was 55. She choose to take a reduced pension and Increased lump sum of £141,575.14. This payment was received on 18th April 2017.
The redundancy is fine but my question is: Is the pension taxable in the year she receives it (i.e. 2017/18) or on her retirement date (2016/17). This will obviously have a huge impact on the tax she pays and when it's paid.
Replies (8)
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Does the reference to "a huge impact on the tax" imply that you are planning to include the lump sum as taxable income?
If she ceased employment on 31 March 2017 (Tax year 2016/17), from what earnings will she make a pension contribution in tax year 2017/18?
It was your reference to receiving salary of £65k “on top of” the redundancy (and statement that she took early retirement) that confused. Pension should be taxed when received.