PILON over100k threshold and HMRC time-to-pay scheme

donaldduck123

Hi all there, and hope this message finds you well

this is to ask for general advice. In a nutshell, after losing my job, Payment in lieu of notice pushed me over the 100k threshold and now I have a problem paying this huge tax bill. Looking for advice!

Although I have an accountant helping me, I would like to hear advice from those of you who might have received Pay In Lieu Of Notice very suddenly that brought them over the 100k tax threshold.

In a nutshell, I lost my job very unexpectedly just before the 5th of April last year. It was not planned nor expected, they just unceremoniously got rid of some people. My contract thank goodness allowed me two months' notice, and that was regularly paid to me before the 5th of April. The problem is that I used to be on a rate much lower than 100k and that payment pushed me over the 100k threshold. I found another job after two months, so I used all of the Pilon for my family's living expenses, to cover the two months of gap. Unfortunately, I have a lot of expenses due to family commitments that I won't go in here as they are irrelevant.

I now owe HMRC a few thousand in tax but as I spent the money so I was hoping to apply for a Time to pay arrangement as soon as possible.

I am also hoping, but I guess this is a very long shot, to ask if they could please accept that PILON was used to live those two months when I was unemployed and maybe put part of it in their 2022-2023 calculation instead.

My questions are: has anyone here been through a similar situation?

Any tips or advice?

How difficult was it to apply for a time-to-pay arrangement?

I just found a few messages online regarding this subject (on Reddit) but nothing going into any interesting detail.

many thanks in advance!

Dazed_and_C0nfused

Do you owe more than £3000?

Grumpy_chap

Is all if the payment received PILON, or is some redundancy pay?  Both are treated differently for tax.

It just seems odd that 2 months PILON has taken the OP from "rate much lower than 100k" to over the threshold such that it created this issue to arise.  In addition, PILON is often paid through payroll so that tax and NI are treated and deducted in the normal manner.

If the 12 + 2 months equal, say £105k, that would be a normal annual salary £90k (12/14 of £105k).

The timing was particularly unfortunate as it means no opportunity to increase pension etc to mitigate tax impacts within the tax year.  The OP should consider, though, whether there are any deductions that bring the OP below the threshold (eg pension / gift aid already made).  The OP's Accountant should have already assessed these factors.

For any of the better informed in the forum to give better advice, the OP may need to share more specific numbers and dates.

[Deleted User]

I suppose if he was on £8k a month, that extra two months would take him from 96k to 112k. While 96k is not ‘a rate much lower’ than 100k in my eyes, it would result in an underpayment of £2400. 

Treating the PILON as paid in 2022/23 is a non-starter!

Maybe the op could provide P45 details?