Which year? Left/P45 31/3 - severance pay 25/4

My personal tax client received pay in the new tax year after his P45 was issued

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My new personal tax client left his previous job on 31 March 2022 and that is the date on the P45, although it wasn't issued until 4 May 2022. However, he was paid a severance settlement (part taxable, part non-taxable) on 25 April 2022, so in the new tax year. It is reported on a normal payslip, but, I believe that, quite rightly, no amended/further P45 was issued.

Am I right in thinking that the taxable severance pay needs to be (should have been) reported on the 2023 tax return? And if so, do I put the leaving date as 25 April, as my software won't allow a leaving date in the previous tax year?

Replies (3)

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By Souwester
22nd Feb 2024 22:12

Sorry to post this, but every time I've tried to post the original question (even on different browsers) it's timed out. I'm just posting this response to see if it actually posts!

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By FactChecker
23rd Feb 2024 11:44

FWIW re your subsequent 'comment' post, I've no idea what you were doing or what was happening previously ... but there was no sign of your original post when I went to bed after midnight last night, so it (and your reply) have gone public since then.

Anyway ...
1. You are correct to believe that no amended/further P45 should have been issued.

2. Although unfortunate that the severance payment was issued after the P45 (and in a new Tax Year to boot), you are also correct in thinking the severance pay should have been reported on the 2023 tax return (all of it, not just the taxable portion).
[I say unfortunate because the employer was quite entitled, knowing that the severance pay was due shortly, to hold back the P45 ... but spilt milk and all that.]

3. Since you say that the severance pay was "reported on a normal payslip", hopefully the employer paid this through Payroll and reported it via RTI with the 'payment after leaving' (or "Indicator that the payment is a payment after date of notification of contract ending" to give it its full name) flag set on the FPS?
[If not, I can't predict what data HMRC will be holding at their end.]

4. Finally I can't suggest what date you put as the leaving date in the SATR, as you indicate there are limitations within the software you are using - so will presumably have to work within that limitation (your suggestion being an obvious compromise).

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Replying to FactChecker:
By Souwester
23rd Feb 2024 13:37

Thank you for taking the time to respond. It gives me peace of mind that I was on the right track!

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