Income tax on PILON - too high?

[Marc Symonds]

I was recently made redundant, and have been given £8,382.50 in redundancy, and £15,368.48 for PILON and some other work I did before leaving. PILON amounted to 13 weeks of my previous salary.

The £8,382.50 redundancy money is non-taxable, but, as I understand it, the PILON+ is. My salary was £41,980 PA, which meant I was paying about £507 income tax per month.

In my final payslip which shows PILON, redundancy etc, £5,959.86 has been deducted in income tax, which seems way too high based on what I was normally paying in IT before; it's nearly the same amount of tax I would pay in a whole year.

To me, it looks like I have been taxed as though the amount I have been given for PILON is my normal monthly salary - I used an online calculator and put the £15K in as a monthly salary and it gave a similar income tax amount.

Is it normal to tax PILON this way, or do I need to go back to the company and ask them to recalculate the tax?

TIA, Marc.

[SteLacca]

PILON is taxed in exactly the same way as your salary. Your level of income (exclusive of the PILON) put your right on the threshold between basic rate and higher rate tax, which means that pretty much all of the PILON is taxable at 40%. This will be the case particularly if your tax code was used on a Month 1 basis.

[bd6759]

You will be due a refund because the basic rate bands and you personal allowance are spread evenly over the year. If you get another job, it will sort itself out on your fist pay day. Otherwise it'll get fixed after the year end