medical retirement, PILON & tax on ESA

zzzLazyDaisy

SarEl wrote: »

However this does not mean that PILON will be paid at gross salary (a common misconception). It is tax free in the sense that it is not counted as income for the calculation of taxable earnings. Many employers pay PILON at the net rate though - not gross - so this would need to be checked.

However, OP's question revolves around the fact that the employer has stated an intention to make a tax free payment, whereas the union have advised that the payment will be taxable. In this case, it seems to me that it comes down to the contractual status of the payment.

SarEl

zzzLazyDaisy wrote: »

However, OP's question revolves around the fact that the employer has stated an intention to make a tax free payment, whereas the union have advised that the payment will be taxable. In this case, it seems to me that it comes down to the contractual status of the payment.

True - but I thought it might account for the confusion and explain what appears to be a difference of opinion but actually may be a difference of "translation" It may be that the union has said that the PILON amount would be paid at the net rate, not the gross rate, and this has become garbled into "it isn't tax free". It wouldn't be the first time I have come across people who misunderstood what the term "tax free" meant in this context. Sorry, I probably wasn't being clear - I wasn't disagreeing, just offering a possible explanation.

System

Remember that being free of tax is not the same thing as not counting as income when assessing entitlement to benefit.