I have an employee who is unfortunately being terminated on 1 May 2018. She will not be working any of her notice. Her proposed termination package will consist of a £10 000 compensation for loss of office and a payment in lieu of notice (PILON) of £16 500 in respect of her contractual notice period of three months. Her base pay is £5 000 per month and she receives a car allowance of £500 per month. She has worked for the company for four and a half years. In addition we are planning to pay her a payment for a restrictive covenant of £500. We have no right to terminate the contract by making a PILON. What are the amounts that will be taxable as earnings and what amounts will qualify for the beneficial tax treatment?
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