Payment in lieu of notice

*jadzzia*

Hi guys, I've recently been made redudant and am due to finish my job at the end of this month (last day 29th July). I have worked here for 7 years and am entitled to the statutory redundancy payment of £400 for every year I've been employed £2800. This I know is tax free and I'm fine with this figure. However I have just had my last pay including 2 weeks and 2 days in lieu of notice paid into my bank account.

I guess my confusion is how I am taxed so highly on this amount. Is it correct to be taxed as though I am earning this monthly? As I have had a lot taken away in tax, national insurance and student loan payments - student loan is £100 more than usual! I know this may seem like a small amount but every penny counts when you're about to become unemployed.

I've tried to research this but I'm finding it difficult to get a clear answer. Is this just something that will sort itself out over the years or should I look into it further?

Thanks for any advice you can offer.

Jarndyce

*jadzzia* wrote: »

Hi guys, I've recently been made redudant and am due to finish my job at the end of this month (last day 29th July). I have worked here for 7 years and am entitled to the statutory redundancy payment of £400 for every year I've been employed £2800. This I know is tax free and I'm fine with this figure. However I have just had my last pay including 2 weeks and 2 days in lieu of notice paid into my bank account.

I guess my confusion is how I am taxed so highly on this amount. Is it correct to be taxed as though I am earning this monthly? As I have had a lot taken away in tax, national insurance and student loan payments - student loan is £100 more than usual! I know this may seem like a small amount but every penny counts when you're about to become unemployed.

I've tried to research this but I'm finding it difficult to get a clear answer. Is this just something that will sort itself out over the years or should I look into it further?

Thanks for any advice you can offer.

The clue is in the title. It is pay, therefore it is taxed. You would have been taxed on it if you had worked your notice therefore you are taxed on it when it is paid in lieu of you working your notice.

The period of 2 weeks 2 days seems odd though - did you work some of your notice and this is the residue? Or is some or all of it untaken holiday?

*jadzzia*

Hi, yes I did know I would be taxed on the 'payment in lieu of notice' where I am confused/annoyed is that I have been taxed at a higher rate as it's all been bundled into the one pay slip. If this is how they work it out then I guess there's nothing I can do about it. It just seems silly to recalculate someones tax when they are being made redundant and tax them at a higher rate - as apparantly it takes me over some 'magic threshold' - as this won't be my future monthly wage it strikes me as odd? If I had worked the extra 2 weeks and 2 days and been paid the wage at the end of the following month then I assume I would have been taxed less? Sorry for all the perhaps silly questions, I'm trying to get my head round it all.

As for the 2 weeks and 2 days figure this is due to me working some of my 7 weeks notice and the leftover is payment in lieu.

Thanks for your response.

jazzyman01

If your annual income would not exceed the magic sum to take you into the higher earner bracket, then you should not see a significant tax on your income.

Student loan, not sure but my colleague tells me the repayment is based on earnings so could be right. Perhaps you could ask your payroll officer?

*jadzzia*

This is why I thought it odd. As I will be unemployed and not earning said amount monthly. I know I can claim it back or my tax code will be altered accordingly when I do find new work but it just seems wrong. It was the payroll officer who said the pay had gone over the 'magic threshold' and this is why the student loan and tax is higher - it just doesn't seem right to me and I would prefer information from an outside source. I will try and get some sense from the tax office. Thanks so much for your reply.

getmore4less

ITs the way PAYE works.

You can P50 wait a month(or two) to get the rebate or sign on and it will come back slowly on the JSA and when you start your next job.

did you get 7 weeks notice with what was worked and PILON.

*jadzzia*

Yes I had a total of 7 weeks notice with what was worked and the PILON. After looking into this further and with your guys responses it does seem to be correct, just silly that they don't take all factors into account, and an additional kick in the teeth for losing your job!