Tax on redundancy

Scorpio33

I think I understand now.

Legally:
PILON is always taxed - it is paying you your salary they would have paid you if you worked up until your notice period. Any salary payment is always taxable.
Redundancy is always tax free up to £30k.

However:
Your employer is stating you will all get PILON and by default, this PILON is being treated as redundancy, not PILON and therefore not taxed.
However, your contract states it will be PILON and therefore taxed.


Personally, I can't see what the company would have gained from this, as it would have little effect on them if it is treated as redundancy rather than PILON, but you would be saving in tax. Have you asked your employer to amend the payment to treat it all as redundancy? Surely they can put in a change of contract to avoid the tax?

Scorpio33

[Aware that this is a NI site, but the same principle applies]


From: http://www.nidirect.gov.uk/notice-and-notice-pay


"
Is your notice pay taxable?

If you work your notice, you'll be taxed at the usual rate on the money you earn in your notice period. PILON is only taxable if it's been provided for in your contract or is customary. Otherwise, it is not taxable unless the PILON together with redundancy and other compensation adds up to more than £30,000, in which case anything over £30,000 is taxable at the usual rate."


So legally, all PILON is treated as redundancy unless it specifies PILON in your contract.


Not sure there is anything you can do, as your contract does specify PILON...