Redundancy + PILON — how much will you take home?

Reviewed: September 2026

Payment in lieu of notice (PILON) is money you receive instead of working your notice period. It is generally treated as taxable earnings — not lumped together with tax-free redundancy compensation.

What is PILON?

PILON means your employer pays you for some or all of your notice period instead of requiring you to work it. HMRC generally treats it as employment income — like salary — not as a qualifying termination payment.

Why this matters for your take-home

Two packages with the same headline total can leave you with very different net amounts depending on how much is PILON versus genuine redundancy compensation. Our calculator splits these lines so you can see estimated tax on each part.

GOV.UK — termination payments and tax · Does PILON affect Universal Credit?

Examples

£20,000 redundancy + £6,000 PILON

The PILON portion is usually fully subject to PAYE and NI. The redundancy portion may fall within the £30,000 tax-free termination exemption.

£30,000 total, £10,000 is PILON

You cannot treat the whole £30,000 as tax-free redundancy. Enter each line separately for a realistic estimate.

Try the calculator with your figures →