Being made redundant is one of the most unpleasant and stressful things that can happen in your life. If you have been on the receiving end of this kind of news recently, you’ll also find that it can be quite a confusing time, on top of everything.
To help you in some small way, we’ve devised this simple guide to looking after the one thing that is probably the furthest from your mind – your tax. Not only should it help you ensure you have the correct information on your redundancy payment with regards to the tax paid, it might even help you claim tax back if it is due to you.
Starting with your statutorily entitlement:
Firstly, there is an act called the Redundancy Payments Acts 1967–2014. This provides a minimum entitlement to a redundancy payment for any employee who has worked with an employer for a minimum of two years. However, some employers agree additional payments on top of the statutory amount they are entitled to.
What you’re entitled to:
Your statutory redundancy payment is a lump-sum payment. This sum is based on your pay, for example, your normal weekly amount you received including average regular overtime and benefits-in-kind but before tax and PRSI deductions.
However, the amount of statutory redundancy is subject to a maximum earnings limit of €600 per week (€31,200 per year). Once you are eligible, you are entitled to:
• Two week’s pay for every year of service over the age of 16
• An additional one week’s pay
While your statutory redundancy payment is tax-free (subject to a maximum lifetime tax-free limit of €200,000), it’s not always automatically processed in the year which you are receiving your redundancy. As a result, you may need to manually review your taxes for that year.
Your Tax Back Entitlements
When you are made redundant, you become entitled to claim tax back on a number of tax exemption options. Basically, whichever of the following are higher.
The Basic Exemption you are due is €10,160, plus €765 for each complete year of your service.
Basic Exemption plus Increased Exemption
An additional €10,000 – called the Increased Exemption – is also available if you haven’t received a tax-free lump sum in the last 10 years and you are not getting a lump sum pension payment now or in the future.
Standard Capital Superannuation Benefit (SCSB)
This additional relief normally benefits people with higher earnings and long service. You can use it if it gives an amount greater than either basic exemption or Basic Exemption plus Increased Exemption. The assistance from an independent tax expert such as Irish Tax Rebates may be required to complete this calculation.
We’re here to help.
Once again, if you have recently been made redundant, IrishTaxRebates.ie would be happy to help review your tax for you in the hope that you might be able to get some tax back.
You can apply quickly online for a free tax review, if you are not due tax back, there is no fee. We hope it might help in some small way, during what can be a very difficult time.