Notional Tax

Chapman1290 · 10 December 2018 at 10:30PM

Hi all
Just received an email about my compensation for loss of notice pay.
I'm entitled to 4 weeks pay but have had £361.12 taken as notional tax.. I was told that the loss of notice pay couldn't be taxed..

I read on another site that depending "how" the employer made their employees redundant would affect the loss of notice pay being taxed?

Me and all other employees were called into a meeting and told to go home as the managing director decided to close the business down effective immediately. And the company was being put into insolvency/liquidated.14 people in total made redundant without warning..

Is this tax correct?

TadleyBaggie · 11 December 2018 at 12:19AM

This was answered in post #3 of your other thread:
https://forums.moneysavingexpert.com/showthread.php?t=5930999

PILON is taxable.

antrobus · 11 December 2018 at 3:15AM

20. How we work out compensatory notice pay

Your compensation is the number of weeks' statutory notice you were entitled to but did not receive, multiplied by your actual weekly wage. If you get another job during all or part of this notice period, we have to deduct any wages you earn. If you do not get another job, you should claim any state benefits you are entitled to. We have to deduct any state benefits you are entitled to even if you have not claimed that benefit. We also deduct a notional amount for tax, as you would have paid this as tax had you received the notice payment as wages. If, after these deductions, the amount is still over the current limit, we have to limit your money to the statutory amount.

https://intranet.meithrin.co.uk/creo_files/upload/downloads/guideforemployeesininsolvency.pdf

Followed by an Example of compensatory notice pay calculation.

Notional tax refunds are possible.

Chapman1290 · 11 December 2018 at 11:17AM

Just spoken to the redundancy helpline people and this is what j have been told.

The notional tax applies to the loss of notice pay at 20% if earning above £11,000. The notional tax is not paid to the tax office, but paid back into the national insurance fund.

Hope this is correct and/or helpful to anyone else.

getmore4less · 13 December 2018 at 10:38PM

IT has always been possible for PILON to be paid net of any deductions.

In the past employers could keep the tax and NI if it was not payable.

Since all PILON became taxable that was not possible maybe the NI fund got a concession.

Notional Tax

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