Do you have to pay tax on a lump sum disability payout from UNUM

8
Found 10th May 2016
A relative of mine has been off work due to disability for a few years, luckily her employer had an income protection insurance (from UNUM) taken out on all of its employees (it was an American company). Now, after having been paid a monthly amount for a few years, UNUM has offered her a lump sum amount in lieu of monthly payments.

The question is, would the lump sum be taxed or tax-free? And if it was taxed, what sort of percentage would she be looking at?

She's asked me but I'm not familiar with the vagaries of taxation other than what gets taken off my wage each week. I have told her that she should seek out an independent expert opinion, but not sure of who I should recommend? The CAB in our town are pretty useless.
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No its exempt-call local tax office to confirm
stoney73

The CAB in our town are pretty useless.


I wonder if its the same for TUs, education institutes, tax consultants, trainers, disability rights organisations and local tax office?
Edited by: "tardytortoise" 10th May 2016
All IP payments should be tax free.
tardytortoise

I wonder if its the same for TUs, education institutes, tax consultants, … I wonder if its the same for TUs, education institutes, tax consultants, trainers, disability rights organisations and local tax office?


I don't know, hence my asking. As said, I don't know much about tax, thus my question. I didn't know a snotty person would reply expecting that everyone knew everything already. "I have told her that she should seek out an independent expert opinion, but not sure of who I should recommend?"

Thanks to sowotsdis, much appreciated. It might be common sense, but I didn't think of them first off.
Edited by: "stoney73" 10th May 2016
stoney73

I don't know, hence my asking. As said, I don't know much about tax, thus … I don't know, hence my asking. As said, I don't know much about tax, thus my question. I didn't know a snotty person would reply expecting that everyone knew everythign already.



You expressed an opinion about CAB in your town. That is fine, I respect that opinion. Everyone is entitled to express their opinion. I was merely expressing mine - admittedly in a way that upsets you.
CAB have access to all sorts of resources. Many who work there are volunteers. They are well trained but just like in any other job all of the volunteers need to learn as they go along. CAB also has a very good complaints service which anybody can instigate at any time.

Their website is brilliant and I was able to find the answer to your question there. Here is the link for you to read.
Debt and money >Insurance >Income protection insurance
As others have said it clearly states in there that "the income you get from the policy is tax free."
tardytortoise

You expressed an opinion about CAB in your town. That is fine, I respect … You expressed an opinion about CAB in your town. That is fine, I respect that opinion. Everyone is entitled to express their opinion. I was merely expressing mine - admittedly in a way that upsets you.CAB have access to all sorts of resources. Many who work there are volunteers. They are well trained but just like in any other job all of the volunteers need to learn as they go along. CAB also has a very good complaints service which anybody can instigate at any time.Their website is brilliant and I was able to find the answer to your question there. Here is the link for you to read.Debt and money >Insurance >Income protection insuranceAs others have said it clearly states in there that "the income you get from the policy is tax free."



Sorry, the reason I said what I did is from personal experience over a different sort of matter with our local branch. I know that usually they offer a superb service, usually. Just maybe not where we stay. Still not sure why the snarkiness.
The reason I asked the question here was:
A:) I was at work and wondered if anyone here had been in a similar situation, given that HUKD is a pretty big community
B:) Tax isn't my thing.
C:) Advice

And, while the link you have given says the lump sum would be tax-free, that's if the person has taken it out themselves, and paid the monthly premium.

Just called the tax office, and sadly the lump sum would be taxed, 20% for the first £32,000, and 40% thereafter up to until £150,000.
Basically, because the employer took the policy out to cover the whole company, and as such, my relative never had to pay a premium. So it's classed as an income because there have been tax deductions made on the monthly stipend. Thanks for the helpful replies anyway.

Edited by: "stoney73" 10th May 2016
stoney73

Sorry, the reason I said what I did is from personal experience over a … Sorry, the reason I said what I did is from personal experience over a different sort of matter with our local branch. I know that usually they offer a superb service, usually. Just maybe not where we stay. Still not sure why the snarkiness. The reason I asked the question here was:A:) I was at work and wondered if anyone here had been in a similar situation, given that HUKD is a pretty big communityB:) Tax isn't my thing. C:) Advice And, while the link you have given says the lump sum would be tax-free, that's if the person has taken it out themselves, and paid the monthly premium.Just called the tax office, and sadly the lump sum would be taxed, 20% for the first £32,000, and 40% thereafter up to until £150,000.Basically, because the employer took the policy out to cover the whole company, and as such, my relative never had to pay a premium. So it's classed as an income because there have been tax deductions made on the monthly stipend.



Unsure exactly whether a deeper investigation could unearth whether salary/wages were adjusted down to factor in this Income Protection Insurance and/or whether employees could opt out. Not sure either what help it would be with the gained knowledge/
Regardless of this though and the tax situation, some careful consideration will be required regarding risks associated with your friends condition. I would also hope PIP (the old DLA as was) has been considered.
tardytortoise

Unsure exactly whether a deeper investigation could unearth whether … Unsure exactly whether a deeper investigation could unearth whether salary/wages were adjusted down to factor in this Income Protection Insurance and/or whether employees could opt out. Not sure either what help it would be with the gained knowledge/Regardless of this though and the tax situation, some careful consideration will be required regarding risks associated with your friends condition. I would also hope PIP (the old DLA as was) has been considered.



Luckily, she's on PIP and ESA, so there would be an income afterwards. But it seems like an awful lot of money to lose to tax. Considering that she doesn't own her home etc. It is an American company, so it was part of the package when she joined (luckily). Until the disability, she didn't even know of the income protection. Thanks.
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