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
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