Redundancy - notice period payment & tax

amylou1107

My husband is at risk of redundancy. His role has been made redundant and there are no other suitable roles so most likely he will be served redundancy notice shortly. 

The company don’t have a redundancy policy so will be the statutory redundancy payment only. He’s been at the company for 3 years so will be 3 weeks pay (although it’s capped). 

what we are trying to understand is about notice period payment. He has a 3 months notice period which he will likely be paid for in a lump sum when he’s made redundant. I believe this is payment in lieu of notice. 

I know this isn’t a redundancy pay out but is there anyway he can ask his company about this being a redundancy payment so it can be tax free? Especially given the companies lack of actual redundancy policy. 

Just trying to ensure we end up which was much as possible given the uncertainty of the next few months. 

Thanks! 

Hoenir

All payroll's are subject to periodic audit by the HMRC. Penalties are severe if rules are knowingly broken. 

Grumpy_chap

In the past, payment in lieu of notice in redundancy situations could be made in a manner that was tax exempt.

That loophole has now been closed so payment in lieu of notice will be subject to employment deductions in the usual way.

One option that may be possible is to ask to salary sacrifice the payment in lieu of notice to pension.  That would avoid the taxation but means that there are no funds now.  Not an option if the three months salary are required for short term needs but could be considered if walking straight into the next job.