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Pay in Lieu of Notice - tax free?

(5 Posts)
EColi Sun 23-Aug-09 09:36:11

I'm 'at risk' of redundancy at the moment and trying to work out what situation we would be in if I were to be made redundant.
My contract says that I will get 12 weeks notice period and does not say that I can get payment in lieu of notice but I know that people who were made redundant from my work 6 months ago were offered PILON. From the little I understand, PILON can be tax free in these circumstances (but I would lose out on pension contributions, continuity of service, holiday pay etc).
My redundancy pay may be over the 30k tax-free limit anyway, so if it is over 30k would the PILON be taxed anyway?? (In which case I would be better off with keeping the notice period as it is, since they are most likely to put me on 'gardening leave').
And if anyone has any advice from being made redundant from part of a post (there is a chance they will ask me to consider a part-time (50%) post but I think that they would have to pay me redundancy on the other 50%?? would be very grateful.

EColi Sun 23-Aug-09 19:51:04

BUMP - anyone come in from the sunshine yet?

smittenkitten Sun 23-Aug-09 19:55:52

pay in lieu will be taxable, regardless of the £30K limit. if your redundancy payment is over £30K then you will only have to pay tax and NI on the amount over.

i have heard of 'partial redundancy' schemes, where someone takes a lower graded job or reduces hours and gets a pay off to compensate for the balance. I think these have to be carefully constructed and hte detail of hte scheme would need to be agreed with the revenue so check that your employer has had it approved.

EColi Sun 23-Aug-09 20:28:23

Thanks SmittenKitten - someone else has said to me that if the PILON is not an option in your contract it is a compensation payment rather than pay so it can be not taxed.
And I'll make sure that any partial redundancy has the tax implications sorted out first.

mamayaya Thu 12-Nov-09 23:02:44

EColi you are right.

Up to £30,000 can be paid as a tax-free redundancy payment. Plus you are entitled to your notice. If you have a PILON clause in your contract of employment then this notice pay is subject to tax and NI. If you do not then it can be paid to you tax-free. Let me know if you need help.

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