PILON 20% or 40% Tax ?

kingpenny123

Hello,

I was recently made redundant.

My basic salary was under £50,000 which is in the 20% bracket but with my car allowance on top (£7,000), it put me in the 40% tax bracket as I was then taking home over £50,001.

My payment in lieu of notice, as per my contract, does not pay out any extras or benefits such as my car allowance. So one would assume as this figure is in the 20% bracket, it would be taxed at that rate...

So should my PILON be taxed at 40% or 20%?

Thank you guys !

gdrforest

Pilon is the same as any other pay for Income tax purposes, as opposed to redundancy payment which is tax free up to 30K, so it will be taxed at whatever bracket your total income for the year takes you into.  It may be worth making extra pension contributions to reduce your taxable pay if your finances allow.

chrisbur

Your tax rate is going to be decided on your total taxable income for this tax year ending on 5 April 2021.  Do you know what your income is likely to be between being redundant and the tax year end?