What does a typical UK PILON figure look like?

For most salaried roles, PILON equals the basic pay for the unworked notice period. A £40,000 employee on three months notice would have a gross PILON of roughly £10,000. After income tax and employee NI at standard 2025/26 rates, the net is typically 65 to 75% of the gross depending on tax band and other circumstances.

How is the gross PILON calculated for monthly paid staff?

Annual basic salary divided by 12, multiplied by the number of months of unworked notice. A £40,000 employee with three months notice has gross PILON of £10,000 (£40,000 / 12 × 3). The PILON calculator on this site does the arithmetic for any pay and notice length.

How is PILON handled inside a settlement agreement?

PILON is identified and broken out separately from any redundancy and ex-gratia components. The PILON portion is taxed as earnings under PAYE. The redundancy and ex-gratia portions (up to a combined £30,000) can be tax-free. A clear settlement letter sets out the gross figure for each element and the net figure after tax and NI.

Why does the worked example net look lower than I expected?

PILON attracts income tax at the marginal rate plus employee National Insurance. For a basic-rate taxpayer the marginal rate is 20% income tax plus 8% NI, so 28% comes off the gross. For higher-rate taxpayers it's 40% income tax plus 2% NI, so 42% comes off. The net is usually 58 to 75% of the gross depending on the band.

PILON Examples (UK 2026): Five Worked Scenarios With Net Figures

How the worked examples calculate tax

The examples use 2025/26 UK tax bands:

Personal allowance: £12,570 (assumed already used by other earnings in the same tax year).
Basic rate: 20% up to £50,270.
Higher rate: 40% up to £125,140.
Additional rate: 45% above £125,140.
Employee NI: 8% on the band between £12,570 and £50,270, 2% above £50,270.

The exact tax depends on cumulative earnings in the tax year, your tax code, pension contributions and other personal factors. The figures below are illustrative; your payslip is authoritative.

Example 1: simple monthly salary, one month PILON

Salaried employee earning £36,000 per year (£3,000 per month). One month contractual notice. Employer offers PILON.

Gross PILON: £3,000.
Income tax at 20%: £600 (assuming basic-rate band).
Employee NI at 8%: £240.
Net PILON: £2,160.

Net is roughly 72% of gross at this income level. The total final pay packet adds accrued holiday and any other final pay items, less the same tax and NI deductions on each.

Example 2: mid-career salary, three months PILON

Salaried employee earning £48,000 per year (£4,000 per month). Three months contractual notice. Employer offers PILON.

Gross PILON: £12,000.
Income tax at 20%: £2,400.
Employee NI at 8%: £960.
Net PILON: £8,640.

Net is 72% of gross because the employee is still in the basic-rate band even after the PILON is added. If other earnings in the year had pushed them into the higher-rate band partway through, the marginal rate on the PILON would be higher.

Example 3: salary plus commission, two months PILON

Sales employee earning £42,000 basic plus £18,000 commission. Two months contractual notice. Resignation. Employer offers PILON.

Gross PILON (basic only): £42,000 / 12 × 2 = £7,000.
Commission to date but unpaid: assume £3,200.
Total final pay (PILON + commission, before tax and NI): £10,200.
Income tax on the £10,200: roughly £2,400 at higher-rate marginal (assumes other earnings push the PILON into the higher band).
Employee NI: roughly £255 (most of the band is above £50,270 where NI is 2%).
Net: roughly £7,545.

The commission and PILON are added together in the final pay packet and taxed as earnings. The PILON only uses basic pay in the gross calculation; the commission is paid separately as earned.

Example 4: redundancy package with PILON and ex-gratia

Salaried employee earning £55,000 per year. Made redundant after 7 years of service. Three months notice. Package: PILON, statutory redundancy, ex-gratia top-up.

Gross PILON: £55,000 / 12 × 3 = £13,750. Taxed as earnings.
Statutory redundancy: 7 years × 1 week (age 35) at the statutory weekly cap of £700 = £4,900. Tax-free under £30,000 allowance.
Ex-gratia: £15,000. Tax-free under £30,000 allowance.
Total package: £33,650 gross.

Tax position:

PILON: roughly £5,500 income tax and NI at higher-rate marginal, net £8,250.
Redundancy + ex-gratia: £19,900 paid tax-free (within the £30,000 allowance, with £10,100 of allowance unused).

Total net package: roughly £28,150 (£8,250 from PILON + £19,900 from redundancy and ex-gratia).

Example 5: senior PILON inside a settlement agreement

Director earning £120,000 per year. Six months contractual notice. Exit negotiated as a settlement agreement. Package: PILON, six months of continued benefits, ex-gratia.

Gross PILON: £120,000 / 12 × 6 = £60,000. Taxed as earnings under PAYE.
Continued benefits: paid as taxable benefits in kind under standard PAYE.
Ex-gratia: £35,000. First £30,000 tax-free; remaining £5,000 taxed as earnings.

Tax position on the £60,000 PILON: mostly taxed at higher rate (40%) and some at additional rate (45%), with NI at 2% above £50,270. Net PILON is roughly £33,000 to £37,000 depending on the other earnings in the tax year.

A skilled solicitor structuring the settlement will look at whether additional pension contributions or other reliefs can reduce the effective rate. For the broader framework see what is a settlement agreement?

How to use these examples

Find the example closest to your situation. The gross PILON figure scales linearly with pay and notice length so you can adjust for your numbers. The tax figures depend on your marginal rate, which depends on other earnings in the tax year and your tax code.

For a precise figure on your own situation:

Use the PILON calculator for the gross figure.
Use the redundancy tax estimator for a rough net figure on a redundancy package.
Confirm with your payroll team once the settlement letter is issued.
For complex senior settlements, take advice from an accountant before signing.

Useful calculators

Related guides

Frequently asked questions

What does a typical UK PILON figure look like?: For most salaried roles, PILON equals the basic pay for the unworked notice period. A £40,000 employee on three months notice would have a gross PILON of roughly £10,000. After income tax and employee NI at standard 2025/26 rates, the net is typically 65 to 75% of the gross depending on tax band and other circumstances.
How is the gross PILON calculated for monthly paid staff?: Annual basic salary divided by 12, multiplied by the number of months of unworked notice. A £40,000 employee with three months notice has gross PILON of £10,000 (£40,000 / 12 × 3). The PILON calculator on this site does the arithmetic for any pay and notice length.
How is PILON handled inside a settlement agreement?: PILON is identified and broken out separately from any redundancy and ex-gratia components. The PILON portion is taxed as earnings under PAYE. The redundancy and ex-gratia portions (up to a combined £30,000) can be tax-free. A clear settlement letter sets out the gross figure for each element and the net figure after tax and NI.
Why does the worked example net look lower than I expected?: PILON attracts income tax at the marginal rate plus employee National Insurance. For a basic-rate taxpayer the marginal rate is 20% income tax plus 8% NI, so 28% comes off the gross. For higher-rate taxpayers it's 40% income tax plus 2% NI, so 42% comes off. The net is usually 58 to 75% of the gross depending on the band.

Illustrative worked examples only, not personal advice. Specific tax treatment depends on personal circumstances (cumulative earnings, tax code, pension contributions). For a binding figure on your situation, contact your payroll team, accountant or the firm handling your settlement.