Notice Pay & PILON Calculator 2025/26

With PILON, your employer ends your employment immediately and pays you a lump sum equal to what you would have earned during your notice period — you don’t work the notice. With garden leave, you remain employed for the full notice period, continue to receive your normal pay and benefits, but are not required (or permitted) to come into work. Garden leave keeps non-compete restrictions running, maintains confidentiality obligations, and prevents you from starting a new role. Your employer’s legal ability to use either option depends on your contract.

The first £30,000 of a genuine ex gratia termination payment (compensation for loss of office, not contractual) is tax-free. This includes statutory and enhanced redundancy pay, notice pay paid as a true compensatory settlement (not PILON), and other termination-related compensation. Payments above £30,000 are taxable. Importantly, any element that relates to pay, holiday pay, or contractual entitlements is always taxable even if included in a “settlement agreement” — the tax treatment follows the nature of the payment, not its label.