What is garden leave and how does it affect my pay and tax in the UK?

Full answer

Garden leave applies when an employer keeps you employed during your notice period but tells you not to come to work. It is common for senior or client-facing roles where the employer wants to keep you away from competitors, clients and sensitive information while your notice runs down. Crucially you stay an employee for the whole period, so the legal duties of employment - including confidentiality and not working elsewhere - still apply. For pay and tax, garden leave is treated exactly like ordinary employment. Your salary continues through PAYE, with Income Tax and Class 1 National Insurance deducted as normal. In 2026/27 employee NI is 8% on earnings between GBP 12,570 and GBP 50,270 and 2% above that. Contractual benefits such as private medical cover, a company car or pension contributions usually continue unless your contract says otherwise. Holiday normally keeps accruing too. Worked example: a manager on GBP 60,000 placed on three months garden leave simply receives three more months of normal pay - roughly GBP 5,000 gross a month - taxed at their usual marginal rate, which for this salary spans the 20% and 40% bands. There is no special tax treatment because nothing about the employment relationship has ended; it just continues without you attending. Garden leave is different from a payment in lieu of notice (PILON), where employment ends immediately and you are paid out - PILON is fully taxable as earnings. It is also different from a redundancy or settlement payment. If your departure later involves a lump sum, the GBP 30,000 tax-free rule may apply only to genuine termination payments, not to garden-leave salary. To check the take-home on continued salary during your notice period, use a take-home pay calculator.

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