Share Of Redundancy Package - Tax Question

[Trurider]

During our Divorce, I made an agreement with my ex part of which was that should she be made redundant, which was on the cards, that I would get half her package. She is a Civil Servant on about 24K with some 35 years service. There are rules about what she can expect which I believe are 1 months pay for every year or something like that. Now she says she wants to accept but wants to vary the terms of our agreement as she wouldn't have enough with just half. That's something else. My issue is TAX - what is the position here??? Would I be liable to TAX on the percentage I agree to take??? Obviously, its not much point taking it if the TAX man murders me for TAX. UK Advice please.

[bednobs]

i think tax will already have been accounted for on her payment wont it?

[ubasses]

If this is just a personal arrangement between the 2 of you, she will receive the full sum, anything over £30,000 will be taxed. Depending on how much she has earned during the tax year it could take her into the 40% bracket. She would no doubt expect you to take a smaller amount so that she does not suffer the full tax loss.

[factor-fiction]

As bednobs says, tax will be deducted where appropriate before she gets the redundancy.
There will be no tax to be paid by you, however much she gives.
She will pay income tax on any amount over the first £30000 of her redundancy pay

[factor-fiction]

It depends on the wording of the agreement. It seems fair to me that you get half of whatever she receives after tax.

[whiskeryron]

It would seem fairer to me that whatever she gets you pay half the tax due, why should she pay all the tax & then give you half of the balance ? You could end up getting more in your half than she does if you want her to pay the tax before sharing.

WR.

[DaisyNonna]

Agreed WR.

[factor-fiction]

Both approaches would give exactly the same approach wouldn't they ron?

[boxtops]

It wouldn't give the same result, surely, if the ex was a higher rate taxpayer?

[factor-fiction]

Whatever happens the person who gets the RP pays the tax. I don't see how we can change that.

Anyway, it depends on the wording of the agreement

[boxtops]

None of my business, but IMO that was very generous of her!

[factor-fiction]

Maybe I'm at cross-purposes with Whiskeryron and DaisyNonna but I don't see it matters which way round it's done.

Suppose the RP is £40000. Say this means £30000 tax free and £10000 taxable at 20%, so £2000 tax.

My approach- she gets £38000 after tax; she keeps £19000 and gives him £19000.

The suggested fairer approach: she gives him £20000 (half the £40000) and he pays her £1000 (representing half the £2000 tax she paid. Both end up with £19000.

I can see that if he's a non tax payer though he might argue he should get his share without any tax deduction. But it depends on the exact agreement.

Of course it can get messy if you try to adjust for tax now and she gets a tax adjustment (up or down) at year end.

If she gets a pension and takes a lump sum will you get a share of that too, Trurider?