---
title: Termination Payments | Pay in Lieu of Notice (PILON) Tax Changes
description: Learn about the changes to Pay in Lieu of Notice (PILON) from April 6, 2018, affecting tax and national insurance, in our blog on Termination Payments.
image: https://www.dhpayroll.co.uk/hubfs/payroll%20fraud.jpg
---

[Skip to main content](https://www.dhpayroll.co.uk/blog/payment-in-lieu-of-notice-period#main)

[![dhpayroll](https://www.dhpayroll.co.uk/hs-fs/hubfs/Child%20Theme%20July/logo-header.png?width=207&height=56&name=logo-header.png) ![dhpayroll](https://www.dhpayroll.co.uk/hs-fs/hubfs/Child%20Theme%20July/logo-header.png?width=207&height=56&name=logo-header.png) ![dh payroll logo](https://www.dhpayroll.co.uk/hs-fs/hubfs/dh%20payroll%20logo.png?width=50&height=36&name=dh%20payroll%20logo.png) ![dh payroll logo](https://www.dhpayroll.co.uk/hs-fs/hubfs/dh%20payroll%20logo.png?width=50&height=36&name=dh%20payroll%20logo.png)](https://www.dhpayroll.co.uk/)

- [Home](https://www.dhpayroll.co.uk)
- [Show submenu for About About](https://www.dhpayroll.co.uk/about-us) 
    - [About](https://www.dhpayroll.co.uk/about-us)
    - [Reviews](https://www.dhpayroll.co.uk/company-reviews)
    - [Show submenu for Partners Partners](https://www.dhpayroll.co.uk/business-partners) 
          - [Employee Benefits](https://www.dhpayroll.co.uk/business-partners/employee-benefits-partner)
          - [HR Services](https://www.dhpayroll.co.uk/hr-services)
- [Show submenu for Services Services](https://www.dhpayroll.co.uk/services/managed-payroll) 
    - [Managed Payroll](https://www.dhpayroll.co.uk/services/managed-payroll)
    - [Director Payroll](https://www.dhpayroll.co.uk/services/director-payroll)
    - [Payroll for Accountants](https://www.dhpayroll.co.uk/services/payroll-outsourcing-for-accountants)
    - [Auto Enrolment](https://www.dhpayroll.co.uk/services/pensions-auto-enrolment)
    - [Electronic Payslips](https://www.dhpayroll.co.uk/services/electronic-payslips)
    - [Direct Payments](https://www.dhdirectpayments.co.uk/)
    - [Full Accountancy Services](https://www.davidhoward.co.uk/)
- [Show submenu for Industries Industries](https://www.dhpayroll.co.uk/sectors) 
    - [New Start Ups](https://www.dhpayroll.co.uk/sectors/startup-payroll)
    - [Recruitment](https://www.dhpayroll.co.uk/sectors/recruitment-agency-payroll)
    - [Dental Practices](https://www.dhpayroll.co.uk/sectors/payroll-for-dental-practices)
    - [Nanny and Household](https://www.dhpayroll.co.uk/sectors/nanny-payroll)
    - [Hospitality](https://www.dhpayroll.co.uk/sectors/hospitality-payroll)
    - [Retail](https://www.dhpayroll.co.uk/sectors/retail-payroll)
    - [Education](https://www.dhpayroll.co.uk/sectors/education)
    - [Construction](https://www.dhpayroll.co.uk/sectors/construction)
    - [Vets](https://www.dhpayroll.co.uk/sectors/vets)
    - [Care Homes](https://www.dhpayroll.co.uk/sectors/care-homes)
- [Show submenu for Blog Blog](https://www.dhpayroll.co.uk/blog) 
    - [All blog posts](https://www.dhpayroll.co.uk/blog)
    - [Compliance](https://www.dhpayroll.co.uk/blog/tag/payroll-compliance)
    - [HR Services](https://www.dhpayroll.co.uk/blog/tag/hr-services)
    - [Industry-Specific Advice](https://www.dhpayroll.co.uk/blog/tag/industry-specific-payroll-advice)
    - [News & Events](https://www.dhpayroll.co.uk/blog/tag/news-events)
    - [Outsourcing advice](https://www.dhpayroll.co.uk/blog/tag/payroll-outsourcing-advice)
    - [Technology](https://www.dhpayroll.co.uk/blog/tag/payroll-technology)
    - [Research & Insights](https://www.dhpayroll.co.uk/blog/tag/payroll-research-insights)
    - [Thresholds & Rates](https://www.dhpayroll.co.uk/blog/tag/payroll-thresholds-and-rates)
- [Show submenu for Contact Contact](https://www.dhpayroll.co.uk/contact-us) 
    - [Request a Call back](https://www.dhpayroll.co.uk/request-a-call)
    - [Request a Quote](https://www.dhpayroll.co.uk/request-a-quote)
    - [Locations](https://www.dhpayroll.co.uk/locations)

Open main navigation

Close main navigation

- [Home](https://www.dhpayroll.co.uk)
- Show submenu for About About 
  
    - About
    - [About](https://www.dhpayroll.co.uk/about-us)
    - [About](https://www.dhpayroll.co.uk/about-us)
    - [Reviews](https://www.dhpayroll.co.uk/company-reviews)
    - Show submenu for Partners Partners 
      
          - Partners
          - [Partners](https://www.dhpayroll.co.uk/business-partners)
          - [Employee Benefits](https://www.dhpayroll.co.uk/business-partners/employee-benefits-partner)
          - [HR Services](https://www.dhpayroll.co.uk/hr-services)
- Show submenu for Services Services 
  
    - Services
    - [Services](https://www.dhpayroll.co.uk/services/managed-payroll)
    - [Managed Payroll](https://www.dhpayroll.co.uk/services/managed-payroll)
    - [Director Payroll](https://www.dhpayroll.co.uk/services/director-payroll)
    - [Payroll for Accountants](https://www.dhpayroll.co.uk/services/payroll-outsourcing-for-accountants)
    - [Auto Enrolment](https://www.dhpayroll.co.uk/services/pensions-auto-enrolment)
    - [Electronic Payslips](https://www.dhpayroll.co.uk/services/electronic-payslips)
    - [Direct Payments](https://www.dhdirectpayments.co.uk/)
    - [Full Accountancy Services](https://www.davidhoward.co.uk/)
- Show submenu for Industries Industries 
  
    - Industries
    - [Industries](https://www.dhpayroll.co.uk/sectors)
    - [New Start Ups](https://www.dhpayroll.co.uk/sectors/startup-payroll)
    - [Recruitment](https://www.dhpayroll.co.uk/sectors/recruitment-agency-payroll)
    - [Dental Practices](https://www.dhpayroll.co.uk/sectors/payroll-for-dental-practices)
    - [Nanny and Household](https://www.dhpayroll.co.uk/sectors/nanny-payroll)
    - [Hospitality](https://www.dhpayroll.co.uk/sectors/hospitality-payroll)
    - [Retail](https://www.dhpayroll.co.uk/sectors/retail-payroll)
    - [Education](https://www.dhpayroll.co.uk/sectors/education)
    - [Construction](https://www.dhpayroll.co.uk/sectors/construction)
    - [Vets](https://www.dhpayroll.co.uk/sectors/vets)
    - [Care Homes](https://www.dhpayroll.co.uk/sectors/care-homes)
- Show submenu for Blog Blog 
  
    - Blog
    - [Blog](https://www.dhpayroll.co.uk/blog)
    - [All blog posts](https://www.dhpayroll.co.uk/blog)
    - [Compliance](https://www.dhpayroll.co.uk/blog/tag/payroll-compliance)
    - [HR Services](https://www.dhpayroll.co.uk/blog/tag/hr-services)
    - [Industry-Specific Advice](https://www.dhpayroll.co.uk/blog/tag/industry-specific-payroll-advice)
    - [News & Events](https://www.dhpayroll.co.uk/blog/tag/news-events)
    - [Outsourcing advice](https://www.dhpayroll.co.uk/blog/tag/payroll-outsourcing-advice)
    - [Technology](https://www.dhpayroll.co.uk/blog/tag/payroll-technology)
    - [Research & Insights](https://www.dhpayroll.co.uk/blog/tag/payroll-research-insights)
    - [Thresholds & Rates](https://www.dhpayroll.co.uk/blog/tag/payroll-thresholds-and-rates)
- Show submenu for Contact Contact 
  
    - Contact
    - [Contact](https://www.dhpayroll.co.uk/contact-us)
    - [Request a Call back](https://www.dhpayroll.co.uk/request-a-call)
    - [Request a Quote](https://www.dhpayroll.co.uk/request-a-quote)
    - [Locations](https://www.dhpayroll.co.uk/locations)
- [0808 196 0948](tel:08081960948)

- <https://www.facebook.com/dhpayroll>
- <https://twitter.com/dhpayroll>
- <https://www.linkedin.com/company/dhpayroll/>

[0808 196 0948](tel:08081960948)

# Termination Payments

 May 23, 2018

![Termination Payments](https://www.dhpayroll.co.uk/hubfs/payroll%20fraud.jpg)

Pay in Lieu of Notice (PILON)  
From 6th April 2018, all payments in lieu of notice (PILONs) – whether contractual or non-contractual, will be fully subject to tax and national insurance.

Under previous rules that applied up to 5th April 2018 if a PILON was paid in termination or redundancy situations, and was covered by contractual provision then it should have been subject to tax and National insurance deductions in full. ‘Contractual’ included not only the terms of the contract of employment but also other written provisions (i.e. staff handbook and company redundancy policy).

However, when the contract of employment was ‘silent’ on PILON the payment should have been put through the payroll as free of tax (within the £30,000 threshold) and National insurance. However, this was complicated by the fact the HMRC stated that non-contractual PILONs that are made customarily or automatically on termination are subject to tax and National insurance, making clarity in this matter difficult.

The new regulations, therefore, clarify the situation and remove any element of doubt.

Post-employment notice pay (PENP)

From 6th April Post-employment notice pay (PENP), has been introduced, which represents the amount of basic pay the employee will not receive due to the termination of their contract without proper notice being given.  
PENP is calculated by applying a formula to the total amount paid in connection with the termination of an employment. This element of the payment should be subject to tax and national insurance. The remaining balance of the termination payment (not including holiday pay, normal salary payments, commissions, overtime and termination bonuses) which is not PENP may be included within the overall £30,000 exemption for tax purposes and is free from National insurance.

The rules regarding the tax and National insurance treatment of termination payments still remains complex and care should be exercised to make sure you get it right. Whilst this change simplifies the PILON status, it introduces new terminology and guidelines are still a little unclear from HMRC. If in any doubt ask for advice.  
Contact us  
Contact the payroll team by completing the form on our website. Alternatively, you can call us on 0208 977 3559 at our Hampton Wick office to speak to an adviser.

 

[Image by Drazen Zigic on Freepik](https://www.freepik.com/free-photo/view-unrecognizable-businessman-leaving-office-after-losing-his-job_26346316.htm)

[Company Payroll Services](https://www.dhpayroll.co.uk/company-payroll) [Managed Payroll Services](https://www.dhpayroll.co.uk/managed-payroll)  Director Payroll

[Payroll for Accountants](https://www.dhpayroll.co.uk/payroll-outsourcing-for-accountants) [Auto Enrollment Service](https://www.dhpayroll.co.uk/pensions-auto-enrolment) [Electronic Payslips](https://www.dhpayroll.co.uk/electronic-payslips)

###### Posts by topic:

- [Payroll Compliance](https://www.dhpayroll.co.uk/blog/tag/payroll-compliance)
- [Payroll Outsourcing Advice](https://www.dhpayroll.co.uk/blog/tag/payroll-outsourcing-advice)
- [Payroll Thresholds and Rates](https://www.dhpayroll.co.uk/blog/tag/payroll-thresholds-and-rates)
- [HR Services](https://www.dhpayroll.co.uk/blog/tag/hr-services)
- [Industry-Specific Payroll Advice](https://www.dhpayroll.co.uk/blog/tag/industry-specific-payroll-advice)
- [Payroll Technology](https://www.dhpayroll.co.uk/blog/tag/payroll-technology)
- [News & Events](https://www.dhpayroll.co.uk/blog/tag/news-events)
- [Payroll Research & Insights](https://www.dhpayroll.co.uk/blog/tag/payroll-research-insights)

## Recent Posts

![Men are twice as likely to believe equal pay has been achieved](https://www.dhpayroll.co.uk/hubfs/gender%20pay%20gap%20(4)%20(1).jpg)

### Men are twice as likely to believe equal pay has been achieved

![Neonatal Care Leave and Pay: A Guide for UK Employers](https://www.dhpayroll.co.uk/hubfs/pexels-prestige-by-nature-1116200106-21050251%20(1).jpg)

### Neonatal Care Leave and Pay: A Guide for UK Employers

![Young Adults 3x More Likely to Say Employees Treated Badly](https://www.dhpayroll.co.uk/hubfs/young%20britons%20at%20work%20(1)%20(1).jpg)

### Young Adults 3x More Likely to Say Employees Treated Badly

![dhpayroll ](https://www.dhpayroll.co.uk/hs-fs/hubfs/Child%20Theme%20July/footer_logo%20dh%20Payroll.png?width=207&height=56&name=footer_logo%20dh%20Payroll.png "dhpayroll ")

Expert small business payroll provider with over 25+ years experience. We deliver reliable payroll services tailored to your business. 

[![facebook-logo-fill](https://www.dhpayroll.co.uk/hubfs/facebook-logo-fill.svg "facebook-logo-fill")](https://www.facebook.com/dhpayroll)

[![x-logo-fill](https://www.dhpayroll.co.uk/hubfs/x-logo-fill.svg "x-logo-fill")](https://twitter.com/dhpayroll)

[![linkedin-logo-fill (1)](https://www.dhpayroll.co.uk/hubfs/linkedin-logo-fill%20(1).svg "linkedin-logo-fill (1)")](https://www.linkedin.com/company/dhpayroll/)

#### About Us

---

[About](https://www.dhpayroll.co.uk/about-us)

[Contact](https://www.dhpayroll.co.uk/contact-us)

[FAQs ](https://www.dhpayroll.co.uk/frequently-asked-questions)

[Reviews](https://www.dhpayroll.co.uk/company-reviews)

#### Our Services

---

[Managed Payroll Services](https://www.dhpayroll.co.uk/managed-payroll)

[Auto Enrolment](https://www.dhpayroll.co.uk/pensions-auto-enrolment)

[Electronic Payslips](https://www.dhpayroll.co.uk/electronic-payslips)

[Director payroll services](https://www.dhpayroll.co.uk/director-payroll-services)

[Payroll for accountants](https://www.dhpayroll.co.uk/payroll-outsourcing-for-accountants)

#### Locations

---

[Hampton Wick](https://www.dhpayroll.co.uk/payroll-services-hampton-wick)

[Weybridge](https://www.dhpayroll.co.uk/payroll-services-weybridge)

[Richmond](https://www.dhpayroll.co.uk/payroll-services-richmond)

[Staines](https://www.dhpayroll.co.uk/payroll-services-staines)

[Bagshot](https://www.dhpayroll.co.uk/payroll-services-bagshot)

[Horsham](https://www.dhpayroll.co.uk/payroll-services-horsham)

[Surrey](https://www.dhpayroll.co.uk/payroll-services-surrey)

[Kingston upon Thames](https://www.dhpayroll.co.uk/payroll-services-kingston)

 

#### Contact Information

---

![1 (3)](https://www.dhpayroll.co.uk/hs-fs/hubfs/1%20(3).png?width=40&height=40&name=1%20(3).png "1 (3)")

##### Service address

[Ground Floor, 1 Park Rd, Hampton Wick, Kingston upon Thames KT1 4AS](https://www.google.com/maps/place/Dhpayroll+-+Online+Payroll+Services+in+Surrey+%7C+Kingston+%7C+Richmond+%7C+London/@51.4127741,-0.3118227,21z/data=!4m6!3m5!1s0x48760b96919b4ea5:0xe3a10e57d70d63dd!8m2!3d51.412831!4d-0.3116785!16s%2Fg%2F11ckw285qj?entry=ttu)

![2 (2)](https://www.dhpayroll.co.uk/hs-fs/hubfs/2%20(2).png?width=40&height=40&name=2%20(2).png "2 (2)")

##### Phone number

 [0808 196 0948](tel:0808%20196%200948)  

![3 (3)](https://www.dhpayroll.co.uk/hs-fs/hubfs/3%20(3).png?width=40&height=40&name=3%20(3).png "3 (3)")

##### Email address

[payroll@davidhoward.co.uk  ](mailto:payroll@davidhoward.co.uk)

![4 (2)](https://www.dhpayroll.co.uk/hs-fs/hubfs/4%20(2).png?width=40&height=40&name=4%20(2).png "4 (2)")

##### Business hours

Mon-Fri: 8:30 - 17:30

©2026 dhpayroll. All rights reserved. [Privacy Policy](https://www.dhpayroll.co.uk/privacy-statement-and-cookie-policy) [Terms and Conditions](https://www.dhpayroll.co.uk/terms-and-conditions)Sitemap

```json
{
  "@context" : "https://schema.org",
  "@type" : "BlogPosting",
  "author" : {
    "@type" : "Person",
    "name" : "Emma Barnes",
    "url" : "https://www.dhpayroll.co.uk/blog/author/dhpaymin"
  },
  "dateModified" : "2026-08-18T14:10:11.216Z",
  "datePublished" : "2018-05-23T09:52:53.000Z",
  "headline" : "Termination Payments | Pay in Lieu of Notice (PILON) Tax Changes",
  "image" : [ "https://www.dhpayroll.co.uk/hubfs/payroll%20fraud.jpg" ],
  "mainEntityOfPage" : {
    "@id" : "https://www.dhpayroll.co.uk/blog/payment-in-lieu-of-notice-period",
    "@type" : "WebPage"
  },
  "publisher" : {
    "@type" : "Organization",
    "logo" : {
      "@type" : "ImageObject",
      "url" : "https://www.dhpayroll.co.uk/hubfs/logo.png"
    },
    "name" : "DH Direct Payment"
  }
}
```

```json
{
  "@context" : "http://schema.org",
  "@type" : "AccountingService",
  "address" : {
    "@type" : "PostalAddress",
    "addressCountry" : "GB",
    "addressLocality" : "Hampton Wick",
    "postalCode" : "KT1 4AS",
    "streetAddress" : "Ground Floor, 1 Park Rd"
  },
  "aggregateRating" : {
    "@type" : "AggregateRating",
    "ratingValue" : "4.3",
    "reviewCount" : "6"
  },
  "description" : "DHpayroll is well known online payroll processing outsourcing company in UK. We serve payroll services for small businesses to large enterprises at budget price.",
  "email" : "payroll@davidhoward.co.uk",
  "geo" : {
    "@type" : "GeoCoordinates",
    "latitude" : "51.413529",
    "longitude" : "-0.314521"
  },
  "image" : "https://www.dhpayroll.co.uk/hs-fs/hubfs/logo.png?width=207&height=56&name=logo.png",
  "name" : "dhpayroll",
  "openingHours" : "Mo,Tu,We,Th,Fr 08:30-17:30",
  "openingHoursSpecification" : [ {
    "@type" : "OpeningHoursSpecification",
    "closes" : "17:30",
    "dayOfWeek" : [ "Monday", "Tuesday", "Wednesday", "Thursday", "Friday" ],
    "opens" : "08:30"
  } ],
  "paymentAccepted" : [ "credit card", "paypal" ],
  "priceRange" : "$$",
  "sameAs" : [ "https://www.facebook.com/dhpayroll", "https://twitter.com/dhpayroll", "https://www.linkedin.com/company/dhpayroll" ],
  "telephone" : "0808 196 0948",
  "url" : "https://www.dhpayroll.co.uk"
}
```