PILON Calculator
Work out Payment in Lieu of Notice using HMRC’s Post-Employment Notice Pay (PENP) formula, and see how much of a termination payment falls within the £30,000 tax-free allowance.
Calculate PILON & PENP
Enter the employee’s pay details and notice period to calculate Post-Employment Notice Pay using the HMRC formula, and see the tax treatment of the wider termination payment.
PILON Calculator
Enter pay and notice details to see the PENP result
Basic pay only — exclude bonus, overtime, benefits and commission, as HMRC’s formula does.
Leave as 0 unless a separate contractual PILON sum has already been included elsewhere.
Optional — include this to see the tax-free portion under the £30,000 allowance.
PENP Result
Calculated using the HMRC PENP formula
Key PILON & PENP Terms
The building blocks of the HMRC Post-Employment Notice Pay formula, for quick reference.
| Term | Meaning | Notes |
|---|---|---|
| BP | Basic Pay | Last full pay period before the trigger date, excluding bonus and benefits |
| D | Unworked Notice Days | Calendar days of notice the employee did not work |
| P | Pay Period Length | 30.42 days for monthly pay, 7 days for weekly pay |
| T | Contractual PILON | Any contractual payment in lieu already made |
| PENP | Post-Employment Notice Pay | ((BP × D) / P) − T, taxable in full |
| £30,000 Exemption | Tax-Free Allowance | Applies to the termination payment above PENP |
PILON Calculator FAQ
Everything you need to know about calculating Payment in Lieu of Notice.
PILON stands for Payment in Lieu of Notice. It is a payment made to an employee instead of requiring them to work their full notice period, covering the basic pay they would have received had they worked that notice.
Post-Employment Notice Pay is calculated using the HMRC formula PENP = ((BP x D) / P) – T, where BP is basic pay for the last full pay period before the trigger date, D is the number of calendar days in the unworked notice period, P is the number of calendar days in that last pay period, and T is any contractual payment in lieu of notice already made.
Yes. Since April 2018, all Post-Employment Notice Pay is treated as earnings and is subject to income tax and National Insurance in full, regardless of whether the employment contract includes a PILON clause. Only the remaining part of a termination payment, above the PENP amount, can benefit from the £30,000 tax-free exemption.
Genuine termination payments that are not earnings, such as certain redundancy or ex-gratia payments, can be paid free of income tax up to £30,000. Any amount above £30,000 is taxed as income, and since April 2020 the excess is also subject to employer Class 1A National Insurance.