Tax on payment in lieu of notice.

Higgers65

I am in the process of facing redundancy. On top of my statutory redundancy pay I am also owed 3 months of my notice period which will be paid in lieu of notice but will be taxed. I am concerned that receiving 3 months pay in one go is going to incur a higher rate of tax than ususal. Someone said just take of 40% and thats what you'll get. Is this right? I thought it would be calculated using the usual tax allowance levels and bands.
Many thanks in advance.

Running_On_Empty

Your tax is calculated over a fiscal year, that is the year starts on 6 April and runs until 5 April the following year. All of your earnings during that time will be taxed as one single year whether or not you receive the lot in one lump or spread out over the 12 months.

agrinnall

It's impossible to say how it will be taxed without knowing how much your earnings for the current tax year will be and what your expected redundancy payment is (among other things). It is possible that it may be beneficial to receive the PILON payment after April 5th if that's an option, but we just don't know at the moment.