Contractual PILON but taxed more?

NickL1991 · 19 February 2018 at 4:54PM

Hi there,

New to the website and forum so apologies if this has been posted before. I've had a search and have seen people with similar situations but not quite the same but please do let me know if already answered and happy to check that out.

I was recently made redundant by my company. I will receive my last payslip at the end of the week and have not yet found another job so will be out of work for the immediate future. I have not been with the company for long enough to receive statutory redundancy, but my employer will pay me PILON (as stated in my contract) + 1 month's bonus for me staying on longer to help out. I understand both will be subject to tax, but it is the amount of tax/ if I can obtain a rebate I am unsure about.

Therefore, in my last pay slip, I will receive the equivalent of 5 month's pay: 1 month for february, 3 months for PILON, and one month bonus. However, having seen a preview of my payslip, it seems I am being taxed as if I earned that amount every month so instead of receiving £2300 after tax, I will receive roughly £1700 per month (equivalent) due to higher tax rate being applied. Furthermore, student finance will receive a really big payment. Of course I am happy to pay the tax I owe as normal, but it is frustrating I will end up paying more than normal and will be out of work. Is there anything I can do?

Hopefully that makes sense and sorry for the ramble!

Thank you!!

molerat · 19 February 2018 at 5:09PM

That is the way PAYE works but you will get any overpaid tax back either through PAYE if you get another job before the end of the tax year or by reclaim after the end of the tax year.

and .... https://www.moneysavingexpert.com/students/student-loan-overpayment-refund

Peelerfart · 19 February 2018 at 11:25PM

I was caught in exactly the same way. They assume that your most recent pay cheque,.albeit artificially inflated, will be ongoing and is taxed accordingly.
In my experience, when you eventually, get to talk to them they're quite understanding.
I'll know better, exactly how good they are when/if they change my tax code at end of this month.

antrobus · 20 February 2018 at 12:21AM

NickL1991 wrote: »

...Therefore, in my last pay slip, I will receive the equivalent of 5 month's pay: 1 month for february, 3 months for PILON, and one month bonus. ..

Depending on when you started work for the company, won't you have received ten months salary for April to June, followed by another five months in February, with nothing expected in March?

It depends on the exact numbers, but if 15 months salary is more than £45,000 you will have higher rate tax to pay.

NickL1991 wrote: »

....
However, having seen a preview of my payslip, it seems I am being taxed as if I earned that amount every month so instead of receiving £2300 after tax, I will receive roughly £1700 per month (equivalent) due to higher tax rate being applied.

PAYE is cumulative, so if you really are facing an extra £6000 in higher rate tax, that would imply that your taxable earnings were in excess of £50k.

getmore4less · 20 February 2018 at 8:23AM

what's on the pay slips?

Something looks wrong.

£2300 net after tax(if worked since April)is around £2,984/£35,800 gross.

month 10 would be around £29,834 tax £4000 ish

5 months pay would be around £14,917

total for the year if no more work under £45k tax due around £7,500

tax for the 5 months lump going M10 to M11 should be around £3500 that's £700pm equivalent up from around £400 so £300 more not £600(net £2,300-£1,700) more.

No more income, tax refund of around £900 due m12

NI will be lower than if spread over 5 months.

Contractual PILON but taxed more?

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