Relief cut on hefty severance payouts
A TAX break on lump-sum severance and redundancy payments has been scrapped for amounts over €200,000.
The so-called Top Slicing Relief for the hefty payouts will end in January, but those on average incomes are not expected to be affected by the move.
Finance Minister Michael Noonan told the Dail that the action was being taken in the interest of fairness, with the announcement coming just moments after he stated that pensions in excess of €60,000 would no longer benefit from full tax relief.
If a person is laid off and they receive a taxable lump sum, it may be taxed at the highest rate of 41pc – depending on the person's income for the year.
Top Slicing Relief works to effectively reduce the amount of tax payable.
The relief ensures that the tax payable on the lump sum is limited to the employee's average tax rate over the previous three years. The relief does not apply automatically, but must be claimed.
So you pay the high rate of tax initially and then claim your refund.
The new change in the rules, scrapping the tax break over €200,000, is designed to hit those receiving large payouts and long service middle-income workers out of work.
Irish Independent Supplement