Tax issue on PILON

redvalley

Does anyone know why after receiving my final wage packet with 3 months PILON I see that I paid almost 75% more tax than I would for a normal 3 month period?

Thank you

BoGoF

What tax code was used?

What was your tax code previously?

maisie_cat

PILON is taxable but if you do not work again in the remainder of the tax year you will get some of it back.
Income tax is paid on a cumulative basis under PAYE and the system will not know the difference between a contractual lump sum, a bonus, or a huge pay rise. It is possible that you've been knocked into a higher tax banding, at least on a cumulative basis. If you do not work again before the end of the tax year you can apply for a tax rebate.

comeandgo

maisie_cat wrote: »

PILON is taxable but if you do not work again in the remainder of the tax year you will get some of it back.
Income tax is paid on a cumulative basis under PAYE and the system will not know the difference between a contractual lump sum, a bonus, or a huge pay rise. It is possible that you've been knocked into a higher tax banding, at least on a cumulative basis. If you do not work again before the end of the tax year you can apply for a tax rebate.

As only 5 weeks till new tax year I don't think there will be much of a rebate.

redvalley

Thanks to all who responded. With regards coding it was 869L. I have had that same code all tax year. I should also say that the total earned to date did not go over 40% rate.

Dazed_and_confused

Unless you provide some information from your payslips, ideally the previous one and the one you are concerned about, it is impossible for anyone to know what has happened and suggest reasons why.

oscarward

This happened to me the Pilon was taxed at 40% , the system assumed that I would be paid the same rate the rest of the year. I wish!


Just waiting for end of tax year to reclaim.

chrisbur

Obviously with actual figures this sort of thing is easier to explain but the following may give you some idea of what has happened. Figures have been rounded a bit.
Assume a monthly salary of £1750 which would have a tax due each month of £205
So over three months you would expect to get £5250 and pay three lots of £205 ie £615
Simple figures you get £1750 less £725 tax allowance gives £1025 to pay tax on so 20% of that is £205

For your last month you get your normal month plus 3 months PILON so now you get £7000 but you still only get the one month's tax allowance so
£7000 less £725 tax allowance gives £6275 to pay tax on at 20% which is £1255
Your normal monthly tax is £205 so you have paid £1050 on your three months PILON which is £435 more than you would have expected for three months wages. Which is 70.73% more.

In the example above it is just a case of your normal monthly salary gets a tax allowance set against it but your PILON had no tax allowance as the monthly salary it was paid with used up that months tax allowance.

If your figures are a lot different to these post them and they can be checked over. There are other possibilities.

chrisbur

oscarward wrote: »

This happened to me the Pilon was taxed at 40% , the system assumed that I would be paid the same rate the rest of the year. I wish!


Just waiting for end of tax year to reclaim.

This would only be the case if you are on a non-cumulative ( often called a month 1 or week 1 ) tax code. If you are on a cumulative tax code any correction will have been made or is being made so that by the year end you will have paid the correct tax.