Forum Topic

this is real!!

just had a call from a friend who has just been made redundant from his bank this morning and his wife was also let go last week from her job, brutal. For those of you who think covid is a joke, this is a very worrying time for many young families. with no prospect of a job for either in the near term due to the looming uncertainties in the financial services industry, i fear for many like my friend. As he just said, after the taxman takes 50% of his severance pay he will have enough to last for 4 months and at this rate remaining to live in London is not an option. What a shame, heartbreaking.  

James Smith-Jones ● 2296d35 Comments

That is very sad - and yes I fear the worst is yet to come. One small glimmer of good news though for your friend is that normally redundancy  pay (including any severance pay) under £30,000 is not taxable. I've just checked that with the gov.uk website.

Bruce Hammal ● 2296d

Sad indeed,The first £30k is tax-free, more than enough for most families to last for far longer though than four months surely.

N V Brooks ● 2296d

The first £30,000 of a compensation payment can indeed be"tax free" in most circumstances.  However, unless your employer is paying an additional generous ex gratia amount, the amount you get is:    half a week’s pay for each full year you were under 22    one week’s pay for each full year you were 22 or older, but under 41    one and half week’s pay for each full year you were 41 or olderLength of service is capped at 20 years.Weekly pay is capped at £538.

Anne Brown ● 2296d

I don't think anyone thinks Covid-19 is a joke (although there are a few who genuinely think it's all a hoax - no names, no pack drill). Your friends' situation is dreadful, but there are many in a far worse position, who barely pay 20% income tax, never mind 50%. I should point out incidentally that the first £30,000 of redundancy pay is tax-free.Then there are the many self-employed musicians and actors who fall through the cracks of the Self-Employed Income Support Scheme. We have a friend who lost £8000 of gigs in the past four months, and has no idea when he'll be able to perform again.

Robert Fish ● 2296d

Apologies for repeating information already posted. I received a phone call in the middle of typing my reply, and by the time I finished several other people had commented on the £30k tax-free.

Robert Fish ● 2296d

i hear what you say about £30k tax free but when you have a big mortgage, school fees, council tax, mobile phones,insurance,utility bills etc, £30k not going to go very far living in London.

James Smith-Jones ● 2296d

Agreed. I think people were just surprised by the bit about the taxman taking 50% of his severance. I presume any sum paid as severance  over £30k will be taxed at the appropriate earned income rate - rising to a maximum of 45% above £150,001.

Bruce Hammal ● 2296d

As I said above, £30,000 is the maximum amount that is "free of tax".  Check my previous post for what you actually get for statutory redundancy pay -  it's peanuts.  Given the Covid background to these redundancy situations, it is hardly likely that employers will be making generous ex gratia payments.

Anne Brown ● 2296d

Yes, but if you only get the statutory amounts then you won't be paying tax.The fact that the person in question IS paying 50% tax on the payment indicates a payment well beyond the statutory minimum.

N V Brooks ● 2296d

I was just gently pointing  out that if the gentleman involved really was being taxed at 50% on his severance then he did indeed have a generous employer!

Bruce Hammal ● 2296d

Many people survive on far less then 30K per year and also have to pay council tax, mobile phones,insurance,utility bills etcI am not unsympathetic but a big mortgage and school fees are a lifestyle choice and not a necessity

Paul Fisher ● 2296d

The maximum tax rate in the UK for income is 45%, so I can't see how the 50% comes into it, unless he is including National Insurance, and possibly the loss of annual allowance which generally affects people between £100k-£125k, The 45% starts on earnings of £150k.That said, sympathy to the pair. This is the tip of a very big oncoming recession. Many more similar stories will be discussed in Chiswick in the coming months.

Martin Walker ● 2296d

Well that's not very kind of you Paul towards a family that had lost 2 incomes in a short period of time.  How do you propose they solve paying a mortgage? Sell a property in a deflated market overnight and lose their life savings? By the same measure should we sympathetic towards anyone? Afterall someone on £18K is far richer than someone in a developing country and so the argument goes on.I do think we need to be  little charitable.

Matthew Swain ● 2296d

put it this way, yes he was earning well but the fact remains his household income will be going down to zero. Yes after paying tax on his severance he will still need to pay his mortgage, utility bills, food, insurance, council tax etc and that money will go very quickly. i have just done a back of fag packet calculation for my monthly household outgoings and it is frightening, trust me i am not extravagant! yes the less well off in society are suffering but so will the middle. just realised i did not include council tax and TGT road fines!!!!

James Smith-Jones ● 2296d

Might be the perfect time to release some equity. That said, I imagine a lot of people will be looking to move out of Greater London give the necessity to commute to city centre offices is greatly diminishing."UK housing market enjoys 'mini-boom' as asking prices soar in July" says Rightmovehttps://www.cityam.com/uk-housing-market-enjoys-mini-boom-as-asking-prices-soar-in-july/

Paul Scullion ● 2296d

i agree with you Paul, but the point here is it will have a major impact on this family and yes they will have to change their lifestyle, but that is a chunk of income tax lost to the exchequer, the private school loosing school fees which could mean teachers having to take a pay cuts, cleaner no longer needed, night out cancelled etc, it has an knock on effect down the chain which effects everyone.

James Smith-Jones ● 2296d

As John Donne put it "no man is an island".Interestingly a friend runs a medium sized company which has had to make some difficult decisions. In the end they decided to let go one high earner in order to save the jobs of several modestly-paid employees.

Bruce Hammal ● 2296d

There will be lots looking to cut their cloth in the coming weeks and months, and who can blame those who took out huge mortgages when times were better?

Gordon McDonald ● 2296d

Yes I really fear for many households once this new recession kicks in and the economy in generalI was made redundant in 2010 after 15 years with the same company and although I was extremely well looked after financially by them at the time I went through a very low self esteem period for a few months afterThe ironic thing I was employed again by them two years later on better terms and am still with them now

Paul Fisher ● 2296d

"I should point out incidentally that the first £30,000 of redundancy pay is tax-free."  You will probably find that he has also been given 12 weeks 'notice' on full pay so if he is in the 50% tax bracket he should be OK for more than 4 months. I do wonder though, why a company would make someone  redundant when they still have the Furlough option for a few months albit it capped at £2500 per month.

Steve Taylor ● 2296d

" How do you propose they solve paying a mortgage?"They would surely have insurance to cover the mortgage for up to a year!  If, not their Bank or Building society will freeze payments so they won't have to sell up in the near future

Steve Taylor ● 2296d

I fear this has hardly begun no matter what you do or where you work. I see Beefeaters at the Tower of London are facing redundancies.....

Bruce Hammal ● 2296d

Steve you are very matter of fact about my friends financial position and no doubt many more in the coming weeks will find themselves in the same position. The fact that they both had well paid jobs does not mean they are set up for life.

James Smith-Jones ● 2296d

"The fact that they both had well paid jobs does not mean they are set up for life."I know, James. The point I try to make is that it is indeed a very real situation for hundreds of thousands of people but there is lots of help out there for him and many more people far less fortunate than him and no doubt he would have negotiated a redundancy package that was far more attractive than going on the Furlough scheme.I agree that very few working people can claim to be set up for life.

Steve Taylor ● 2296d

My youngest son was supposed to start a new job on March 23, and we all know what happened then, although the company hoped to take him on when things improved, much of their work was connected to Heathrow - and we all know what's happened there too! So he has to apply for UC - and we are mostly keeping him, fortunately he is still single, jobs are scarce and the Job Centre seems to think sending him on a Mickey Mouse course for a CSCS card (two weeks online from an FE college in North London) which he already has and only needs renewing by October is the answer. A much better course that would enable him to actually stand a chance of employment - forget it, the problem seems to be that these 'job coaches' pretty much haven't got a clue.

Vanessa Smith ● 2296d

“For those of you who think covid is a joke..”Covid has never been the problem, but the government’s decision to destroy society off the back of it, which is why your friend and his wife are now unemployed. The government's destructive agenda has been made easier by imbeciles, which there are plenty of, and you need look no further than the mirror to see a perfect example.

Michael Brown ● 2296d

Some people on this forum are seriously lacking in empathy, describing taking out a mortgage as a 'lifestyle choice'. Nearly everyone has to take out the biggest mortgage they can afford based on their income at the time. Nobody could be expected to foresee the present crisis.

Susan Kelly ● 2296d

It is indeed very real and very sad for many. Nephew married last year, he and is wife bought their first home having worked very hard to save and set themselves up. Both have lost their seemingly safe jobs. Their first baby is due in 3 weeks. They are not alone.

Sean Wales ● 2296d

Honestly Michael you just don’t know when to stop do you. If anyone needs to take a good look at themselves in the mirror is you. You are blinded by the cr@p you spew out about all your conspiracies and you don’t care one bit about the suffering people are going through. I give up with you, not even worth telling you exactly what I think of you.

James Smith-Jones ● 2296d

...Brexit is coming. Hardly going to make the future look any rosier.

Ken Munn ● 2295d

"...Brexit is coming. Hardly going to make the future look any rosier."Well it took a little longer then usual but we got Brexit in to this thread in the end

Paul Fisher ● 2295d

It's a shock but doesn't have to be a disaster.  Time to re-evaluate snd count blessings which in our fast paced lives we probably don't do enough of.  Something that so many of us are likely to face at some time in our lives.

Philippa Bond ● 2295d

Yes this is very real indeed I am being made redundant while going through chemotherapy for cancer no chance of even looking for work whilst off sick and no big payoff just the basic amount makes you wonder wether 35 years loyal service was worth it .

Renate Stroud ● 2295d

"Hardly going to make the future look any rosier."Especially with London being ruined by cycle lanes nobody is going to use when the weather gets colder. Talk about waste of money!

Steve Taylor ● 2295d

I for one much prefer to cycle in cold weather.Hot and sticky, no thank's.

Adrian Irving ● 2295d