Glossary · UK
What is PILON?
Payment in Lieu of Notice — taxable redundancy/dismissal payment for notice period.
Full Definition
PILON (Payment in Lieu of Notice) is a lump sum paid when an employer wants to end employment immediately without the employee working their notice period. Since April 2018, PILON is FULLY TAXABLE as normal income (income tax + employee NI + employer NI) — no longer benefits from the £30,000 tax-free redundancy allowance. The £30k allowance still applies to genuine redundancy compensation (statutory + enhanced) but not to PILON. Garden Leave (paid notice while not working) is different — taxed as normal salary.
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Disclaimer: Definitions are for guidance only. For decisions about your tax, savings, property or pension situation, always consult a qualified professional or refer to gov.uk.