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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


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