Changes to taxation of termination payments


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Form 6 April 2018 all payments in lieu of notice (PILON's) will be subject to tax, and National Insurance contributions. Termination payments will continue to benefit from the existing exemption from tax for the first £30,000.

HMRC has published its February employer tax bulletin which contains a section on changes to the taxation of termination payments. It makes it clear that the changes will apply from 6th April 2018 to employment which ends on, or after, 6 April.

It also talks about post-employment notice pay (PENP) calculations and states that these should not be applied to statutory and non-statutory redundancy payments.

The tax bulletin states that "Detailed guidance on how and to what payments you should apply the PENP formula to will be published in the Employment Income Manual in due course".

This article is taken from HR Law March 2018.

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