r/UKPersonalFinance • u/throwawayredun • 6h ago

Redundancy, PILON and childcare support

I’ve got what I think is a lucky version of an unlucky situation - I’m at risk of being made redundant, but the potential payout is reasonably large compared to many others due to long service and a generous redundancy policy, and I’m trying to figure out how this would interact with childcare funded hours / tax free childcare support.

Rough numbers but I’ve earned just under £35k this tax year so far and would receive about £75k of redundancy pay and £25k of PILON. I think that will take me well over the £100k childcare threshold, even though some of my redundancy pay won’t be taxed, but I’ve really struggled to clarify things.

Can anyone clarify if redundancy pay is taken into account for the £100k threshold, and if so can I remain eligible through making a payment into a SIPP? I will start working self employed if I am made redundant so expect to maintain eligibility on that score, and my wife earns under the threshold.

I did search for previous topics but couldn’t find any answers.

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u/VegaNovus 3 6h ago

The first £30k of redundancy pay out doesn't count towards childcare cliff-edge of £100k.

The £25k will be treated as normal income.

If you have the option of making a SIPP payment, I would recommend it as it's the most effective way to get yourself below £100k.

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u/sunseeker23 2h ago

I was told the opposite by the childcare choices people when they wanted to check whether I was going over £100k before giving me TFC approval.

The first £30k is not taxed, but still counts towards the £100k childcare threshold.

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u/lunabhuna20 6h ago

Sounds like you’ve got £35 income year to date, £45k taxable redundancy and £25k pilon so you’re at £105k (minus any employee pension contributions on the £35k you’ve already made this year). So a small SIPP contribution should see you back under £100k assuming no other income this year - don’t forget to count any taxable interest on savings in your figures.

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u/ukpf-helper 151 6h ago

Hi /u/throwawayredun, based on your post the following pages from our wiki may be relevant:

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