PILON / holidays entitlement and tax

Hello,

I've just had my first redundancy consultation today (2 people being made redundant in the team) and i wanted to ask about the pay in lieu, holidays and tax.

I asked for the 'pay in lieu' to be tax free, and this was refused.
is that correct?
My contract states: "The company reserves the right at its sole discretion to pay you your basic salary in lieu of the whole or part of any entitlement that you may have to notice."
- does this mean i have to pay tax on my 1 month notice (not being worked but paid in lieu) ? or is it purely up to the company?

holidays - i have 2 from december, 2 from jan and i asked about the 2 possible from my 1 month notice.
1. i was told i can't have holidays from my notice in lieu?
2. i was told the holidays accrued will be taxed

is this correct? if i get taxed on the pay in lieu, should i not receive the holidays for that period too if it's being treated as a salary ?

i am going to see the local CAB tomorrow but any advice would be great!

thank you,
a

Thank you for your question.

Although basic income tax doesn't include damages or compensation payments under £30,000 on the termination of employment , in certain circumstances payments are taxable e.g. outstanding pay, holiday and sick pay is taxable in the normal way. Statutory or non-statutory redundancy payments are not taxable unless the payment exceeds £30,000.

It is a controversial area as to whether pay in lieu of notice is taxable as earnings from employment or exempt from tax. However, as your employer reserves the contractual right to make a payment in lieu of notice, this will be a taxable earning and will have to be taxed in the normal way.

With regards to your accrued holiday pay, such payments accrue as a contractual/ statutory obligation and are also taxable earnings and are therefore taxable in the normal way.

I hope this has helped, but please don't hesitate to return if you require any further advice.

hello,

thank you very much for the reply (this is west4 but i had to re-register, weird).

does this mean i can accrue my 2 days holiday into the 1 month of notice in lieu or does that month (in this case feb 6th - march 6th) not qualify for the accural? (ie. for holiday payment)


thank you,
a