Tax on statutory PILON/SMP

[mummyh2016]

I was made redundant 3 months ago whilst on maternity leave, my (ex) employer has entered liquidation so I have had to claim for my redundancy, SMP and PILON off HMRC.

I've received confirmation off HMRC the last 2 days that my redundancy and PILON is on its way to me. What has shocked me though is that they have taken 20% off the PILON for tax. Now I should be well below the threshold for paying any tax, I've not technically earned anything this tax year. PILON was only 2 weeks pay which is obviously capped.
SMP is around £150 a week - am I going to have 20% knocked off me for that also? I believe I will be owed 30 weeks that I am expecting to get in one lump sum so we're talking £900 less I'm going to get if that's the case. I don't get how this is fair? I know it should even up when I do get another job but I need this money now, not in 6 months time.

I think you must speak to HMRC. Tax is a blunt instrument in that the process means that an assumption is made that what you receive in XX month is what you will receive every other month. That is just the way it is. It is possible to arrange for refunds, but I am not sure in what circumstances they might do that mid-year. It's not personal, and they don't predict on an individual basis.

Thanks for replying! Completely get it's not personal, I just didn't realise they'd just take 20% off as surely in the long run it causes them more work readjusting everything at a later date. Mind you I only had the email allowing me to apply for PILON 2 days ago and already had the confirmation of payment so they can't spend too much time on it!

Both PILON and SMP are taxable income, so if you are going to be on SMP for the rest of the tax year & your total income is likely to be below the threshold than you will get the tax back.
You could also call HMRC and see if they can rebate the tax earlier if you're struggling though.

Apparently this can be done, I've checked with an accountant. I'm looking to be back working in November so whilst I know it would sort itself out when I am back working I could really do with it before then.
Them working it out like this just makes me think how much extra work they cause for themselves, I get it's easier at this point in time not to look at it individually and just take 20% off everyone but in the long term surely they have to readjust it for everyone at some point.

Your claim will have been dealt with by the Redundancy Payments Service who deduct the tax but the tax will be dealt with by another department in HMRC.

Ive found having to deal with HMRC at work a bit of a struggle at times as each department has to upload their information one end which effects several other departments. Depending on time scales it can make getting information difficult.

Like others have said you should get a rebate depending on future earnings but appreciate that’s not helpful now

There's no real work involved. It's mostly a computer, which is why it's a blunt instrument. The work for a person is dealing with the individual cases like yours!

Just coming back with how it worked out just in case anyone else is looking for this info in the future (as I could find nothing online from anyone that had been in the same position as I was).
I've had my settlement offer from HMRC which all appears to be correct. No tax or NI has been deducted off my SMP yet, it does state in the letter I may be notified at a later date if I owe some tax and NI. No tax should be due as my SMP started before this tax year and the money owed to me from HMRC for this is from 3rd April this year so I won't have earned enough until I return to work. NI I know will be due but it should be a small amount and I am happy to settle that later on.
One thing though, I had been told by a few people that they thought HMRC would pay me my SMP in one lump sum which is what they've done regarding money owed up to the present day however the rest of my pay will be in my account every 4 weeks until the 39 weeks are up.
I did have a complaint with HMRC last week, when I first put the application through I was told they were working to a 6 week lead time, when I called last week after the 6 weeks had passed I was told it would be another 3 weeks. I did a complaint online with them as I had ex colleagues that were owed wages that HMRC had promptly settled so I mentioned the equality act 2010 and asked why I was being discriminated against when the only difference between me and those is that I am on maternity leave. This may be controversial to some on here and I know it's a different department that would've processed their claim but I can't see how it is okay to leave me another 3 weeks without any money. Less than 24 hours I had a call back advising my claim had been fast tracked and I would receive my owed money within the next week. 2 days after that call it hit the bank. I did ask why it had been fast tracked and I was told my complaint had been classed as a tier 2 complaint which meant it was urgent. Either way I think it ruffled some feathers and it worked.
4 months have passed from when I found out I was being made redundant and I can now finally enjoy the rest of my maternity leave.