London: +44 (0)20 7236 2601
St Albans: +44 (0)1727 869141
Rickmansworth: +44 (0) 1923 771010
Milton Keynes: +44 (0)1908 605552

Changes to taxation of termination payments

There is a generally widespread (frequently mistaken) belief that the first £30,000 of any payment made in connection with termination of employment is tax-free.  The confusion around the entitlement and the complexity of the legislation lead to a number of anomalies and the Government has now simplified the position. 

From April 2018:-

  • Payments in lieu of notice will be subject to income tax and national insurance;
  • Any post-employment payments which would have been treated as earnings had the employee worked the notice period will also be subject to tax and national insurance; and
  • A £30,000 exemption for payments relating solely to termination of employment will continue for income tax together with a full exemption from employees national insurance on the entire sum. Employer national insurance contributions will only be exempt in relation to the first £30,000.

Please contact David Hadley if you would like to arrange a no obligation meeting to discuss matters in connection with any corporate or business tax issues.



Date: 23rd February, 2017
Author: David Hadley


Articles from this Author

Contact Business Service Partners

Choose from the drop down menu below to select a Partner to contact.


Disruption in distribution click on the link to read how Corporate Advisory Partner, Henry……

Vendor assistance and vendor due diligence click on the link to read Corporate Finance Dire……



For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole

Click here to follow us on LinkedIn