Income tax and NI contribution exempt from Notice pay?

Element_2

I have just been made redundant from a job of 4 yrs. I was at the CAB today and have been advised that I can dispute having to pay income tax and national insurance from my 4 weeks 'pay in lieu of notice'. I am unfamiliar with this situation; my employer does not want me present during this notice period.

Has anyone ever heard of such a case - where the pay in lieu of notice is exempt from tax & NI?

Cheers

jazzyman01

Yes - where the possibility of pay in lieu of notice is silent in the contract of employment then you may not be required to pay tax and NI. If the Company agree that they will pay tax free, then you will probably have to sign an document agreeing that you will pay any tax should it become due.

getmore4less

It will have to be PILON and not just a don't come into work during your notice.

you need to be terminated and paid for the notice.

Check our contract, and also if it has become custm and practice to give PLON.
If your company insist on the tax/NI you will have to work with HMRC to get it back.

amanda40

So if Paymkent in Lieu of Notice is not mentioned in the Contract of Emplooyment, you should not have to pay tax /Ni on it - does the same apply if they give you a different amonunt to what is mentioned in contract ie 13 weeks in stead of a month for example?

jazzyman01

It would not make sense. Why pay you PILON for 13 weeks when you are only due 4? They could easily identify this as enhanced redundancy and therefore avoid this problem altogether. If this is what your Company is proposing, get them to make it an enhanced redundancy and then, subject to the £30k cap, you should get it tax and NI free.
If silent in the contract then yes, you could potentially get the PILON free of tax and NI. However, as getmore4less states, the Company is not obliged to do this and may wish to pay it and leave to to claim back.

Pete111

HMRC are increasly vigourous in chansing up untax PILON - even where there is no clause in a contract.

If others in your company have been paid PILON in recent times they are likely to see this as an implied T&C and demand it be taxed so be careful here. Many employers insist it is taxed at source to avoid HMRC coming back to them with a bill at a later date also...

Element_2

Thanks for the replies, I am going to wait until I get the final salary and then go to the local tax office for advice on the matter and then if they confirm what the CAB said - I will try to claim it back. Bit of a funny situation in that conveniently my company have actually made two mistakes in their calculations of both 'untaken holiday' - pay and redundancy pay (based on age) which give me more cash than I know I'm entitled to - so I reckon I'm best to keep quiet for now... Then later on when its all done & dusted - I'll begin the claim for the tax and ni... I think it speaks realms when I have already made a claim for jobseekers allowance during the 'notice period' as I have been given a letter from my employer confirming redundancy and that as from that date I am no longer an employee yet it does not mention the pilon. I reckon the CAB are right and that I will have a just claim for a tax rebate...

I am only due 4 weeks as I have only worked 4 years - so am not eligible for the 13 weeks...