AAT Comment: Payment in lieu of notice – to tax or not to tax

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The term ‘payment in lieu of notice’ or ‘PILON’ covers a range of payments made on terminating employment.

They are made in a variety of situations and prior to 6 April 2018 had tax implications for employee and employer that need to be considered.

From 6 April 2018 the distinction between contractual, non-contractual, implied, reserved right, customary, automatic, exemption for payments relating to foreign service and other forms of PILON has also been removed. All PILON is now taxable and subject to national insurance contributions.

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