Job stuff and taxation things.

[weeksy]

So as you may have seen, i'll be losing my job in the semi-distant future.

I was planning on doing some part-time work after that, mostly 'just because' really.

So i have a question/ scenario if you can just sanity check for me.

My redundancy i can take £30k tax free, then pay the rest into my pension (which i can take out tax free in a few months if i want as i turn 55).

But my thoughts are on my earning and if i'm earning bottom rate pay but already will be a higher rate tax payer, then there's little point me working until after April ? e.g April would be the start of a new tax year and as long as i'm below the £12,500 then that earning would be tax free. However if i started working before April, i'd get taxed at 40% ?
Now it's not the fact i mind a 40% tax bracket per se, but that's on a good wage, not on £12,500. I don't fancy being taxed £4500 out of that earning as i may as well not bother.

I don't 'need' to go to work really, but it would be nice to have a bit more income for a couple of years.

[Count Steer]

Sounds right to me. You're taxed on your total income for the tax year so, if you, say, pass the 40% level in November anything from there to April 5 will be taxed at the higher level.

Best to get redundant in March.

(My brother had a similar dilemma. Retired but they wanted him to come back on an ad hoc/self-employed basis to cover peak demand/train new staff - he was a precision engineer doing CNC stuff etc. Decided he didn't want his pension taxed at the level it would be if he did more than x days a year and said 'Soz, no more' after a few months).

[Horse]

Best to get redundant in March.

(My brother had a similar dilemma. Retired but they wanted him to come back on an ad hoc/self-employed basis to cover peak demand/train new staff - he was a precision engineer doing CNC stuff etc. Decided he didn't want his pension taxed at the level it would be if he did more than x days a year and said 'Soz, no more' after a few months).

My taxation has been bouncing around!

Retired June (2023), so 3 months' full salary, and my older final salary pension started. A few months later, intermittent hourly-paid work.

Luckily (?), all standard rate, so no additional complications.

[Taff]

That doesn't make sense to me that you would pay any tax on a monthly salary that is below the 12500÷12 figure

The way I understand it is that the tax in each pay packet is calculated separately, i.e. You don't use up all of your 12.5k tax free in the first few months of the year, you have a portion allocated to each month. And so if you earn 1k in month 11 then you don't reach the threshold to pay any tax.

[Count Steer]

That doesn't make sense to me that you would pay any tax on a monthly salary that is below the 12500÷12 figure

The way I understand it is that the tax in each pay packet is calculated separately, i.e. You don't use up all of your 12.5k tax free in the first few months of the year, you have a portion allocated to each month. And so if you earn 1k in month 11 then you don't reach the threshold to pay any tax.

If your tax code is set on assumed earnings for the year and they end up lower than that then there will be an adjustment if the lowering crosses a rate change.

If, say, you've earned £200k between April 25 and Feb 26 and only £2k in March 26 your total income was still £202k for the tax year and that's what you're taxed on and anything over £125,140 got clobbered at 45%.

So, if your short term side hustle in March earned you £2k the taxman took £900 of it.

At least, that's how I understand it.

[gremlin]

Surely the tax would be banded anyway, so only the portion you earn over each of the thresholds would be taxed at the applicable rate.

Granted, if you're pulling in pension for doing nothing and then the additional part-time salary takes you into a higher tax bracket, that's gonna make you question as to whether the additional effort is worth it. Depends on whether you get satisfaction from doing it, I suppose.

[MyLittleStudPony]

Surely the tax would be banded anyway, so only the portion you earn over each of the thresholds would be taxed at the applicable rate.

Granted, if you're pulling in pension for doing nothing and then the additional part-time salary takes you into a higher tax bracket, that's gonna make you question as to whether the additional effort is worth it. Depends on whether you get satisfaction from doing it, I suppose.

I think it's all added up at the end of the tax year, not treated as separate incomes. And what he will have already received will have 'used up' the lower rate amounts. So anything additional goes into the higher threshold for tax.

[gremlin]

Surely the tax would be banded anyway, so only the portion you earn over each of the thresholds would be taxed at the applicable rate.

Granted, if you're pulling in pension for doing nothing and then the additional part-time salary takes you into a higher tax bracket, that's gonna make you question as to whether the additional effort is worth it. Depends on whether you get satisfaction from doing it, I suppose.

I think it's all added up at the end of the tax year, not treated as separate incomes. And what he will have already received will have 'used up' the lower rate amounts. So anything additional goes into the higher threshold for tax.

Exactly my point.

[Yorick]

It doesn't matter how much you earn for each part of the year.
At end of year, the tax man adds up all the earnings and treats that as total.
Then the applicable tax is applied to that total.

Any over payments or under payments are seen.

They send you a refund or demand as applicable.

[Count Steer]

Surely the tax would be banded anyway, so only the portion you earn over each of the thresholds would be taxed at the applicable rate.

Granted, if you're pulling in pension for doing nothing and then the additional part-time salary takes you into a higher tax bracket, that's gonna make you question as to whether the additional effort is worth it. Depends on whether you get satisfaction from doing it, I suppose.

Or whether you're prepared to work and get £x in you virtual pocket and the taxman gets £y or forgo the £x and get nowt because you'd rather have £0 than use your time to get £x.

Rather depends on what x is and how hateful the job is + if you need the NI payment to keep heading for a full state pension. Someone suggested that if you miss a month you lose the whole year's credit.

I'm in the 'glass half full' category. £x in my pocket is better than in someone else's.

[gremlin]

Going off topic slightly, I know people who have done the 'Finish on Friday, into full retirement Monday' and others who have taken a glide path into it, either by cutting hours as the existing employer or moving to a part-time job. The latter seem to transition better, so IMHO it's the way to do it.

[Yorick]

So as you may have seen, i'll be losing my job in the semi-distant future.

Bugger. Did I miss something?

[weeksy]

So as you may have seen, i'll be losing my job in the semi-distant future.

Bugger. Did I miss something?

Nothing too exciting, they're closing the company. We'll get paid off about 18 months pay, so i can theoretically retire then, but i wouldn't mind doing something to keep me busy. Whehter that's something like driving Tesco vans or whether it's fixing bikes, i don't know yet.

[Horse]

Going off topic slightly, I know people who have done the 'Finish on Friday, into full retirement Monday' and others who have taken a glide path into it, either by cutting hours as the existing employer or moving to a part-time job. The latter seem to transition better, so IMHO it's the way to do it.

My tuppence:

Plan stuff to keep you busy, have a purpose.

I had loads planned - have done about 1/3 at most. But other unexpected stuff (like part-time work) has been offered.

Think about when someone asks "what do you do?". When employed, there's an easy answer. When retired, will you miss having an identity?

And do want to sit watching daytime TV all day?

[weeksy]

When retired, will you miss having an identity?

My identity these day is "race dad, paddock support, spanner bloke, bike repairs" so that won't change and is likely to arguably increase i'd say

[Horse]

When retired, will you miss having an identity?

My identity these day is "race dad, paddock support, spanner bloke, bike repairs" so that won't change and is likely to arguably increase i'd say

Yup, I don't think it's something you need to worry about

[Silly Car]

I’ve not read all of the replies but if you are currently a higher rate tax payer, stop working and don’t start again until 6/4/27, you’ll be able to reclaim overpaid tax as mentioned above, tax is collected pro-data each month via PAYE assuming you’ll have the same / similar income each month.

Feel free to message me if you want to discuss the most tax efficient ways of drawing from your accumulated pension fund(s).

[Yorick]

So as you may have seen, i'll be losing my job in the semi-distant future.

Bugger. Did I miss something?

Nothing too exciting, they're closing the company. We'll get paid off about 18 months pay, so i can theoretically retire then, but i wouldn't mind doing something to keep me busy. Whehter that's something like driving Tesco vans or whether it's fixing bikes, i don't know yet.

That's a nice position to be in. You're in charge of your own destiny and future.

[weeksy]

I’ve not read all of the replies but if you are currently a higher rate tax payer, stop working and don’t start again until 6/4/27, you’ll be able to reclaim overpaid tax as mentioned above, tax is collected pro-data each month via PAYE assuming you’ll have the same / similar income each month.

Feel free to message me if you want to discuss the most tax efficient ways of drawing from your accumulated pension fund(s).

Hey mate, yeah that's about right. With the caveat that i won't stop working until the time they tell me not to and pay me off, but that will 100% be before the end of this year, never mind the tax year.

It's a shame that it'll be winter i'll have off... but i'll cope

[Bobzilla]

So to be a higher rate taxpayer you need to have (taxable) earnings over £50,270 in a tax year, I.e. 6 April to 5 April. If you've earned over that already then hat's off to you and any more work will be taxed at 40%. If not, you will be paying tax at 40% once you have full tax year taxable earnings of over £50,270.

Note that NI is different - that is actually calculated on a pay packet basis.