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Why is parents non taxable redundancy payment included in loan calculation.

My wife was made redundant in June. She received statutory redundancy which amounted to £13000, so wasn't liable for tax. Her earnings for this year have dropped by 15%. We filled in a change of circumstances form, with all the correct information on it, but were told that our income hasn't dropped by 15%. My wife has no income, all the the money she received has been used to service debts in order to make it easier to manage on one salary. We are however now not able to help our daughter out as much as we were and this is causing us and her some financial hardship. This is the response I received:

Our appeals team have forwarded your email to us to respond to as it does not meet the appeals criteria. Due to GDPR I can't provide you actual details of your wife's account but I can reply regarding any details you have mentioned in your email. You state that your wife received a redundancy payment under £30,000 which is the amount at which you start to pay tax. All redundancy payments are a taxable source of income, even if you don't pay tax on them until £30,000 they are still a taxable income and must be included in our assessments. It works the same as a tax code. Most people receive a tax free allowance of £12,570 and then pay tax on anything above this amount but the whole source of income is still taxable income. It works the same with redundancy payments, the tax-free allowance is £30,000 so anything under this you don't pay tax on, but the whole amount is still a taxable income. I hope that explains why we must include all redundancy payments in our calculation's Kind regards

This makes no sense as if a student was made redundant when in employment, the redundancy would not be used as part of their repayment calculation " as it would not be If it is liable to Class 1 NICs then it is also liable to Student and or postgraduate loan repayments"

So if that is the rule for repayments why isn't it the same for calculations? The loan would still be subject to repayment by my daughter. My concern is that financially we may struggle to support her and she is struggling already.

Reply 1

SFE Clare

Official Rep

Hi malcolm hampton,

We can provide general advice here however, going by your message it sounds like the appeals team haven't registered this as an appeal due to the policy and guidance set out by DFE regulations have been followed. I can confirm however that redundancy payments are included in the assessments therefore if that would take the income up to an amount that would not be a 15% drop since the last full tax year, the assessors aren't able to process the Current Year Income assessment.

Thanks, Clare