Following a consultation process, it was confirmed in the Spring Budget that the reform of the tax rules relating to termination payments will take effect from 6 April 2018 and will include the following:
– All contractual and non-contractual payments in lieu of notice (PILONs) will be taxable as earnings;
– The first £30,000 of a genuine termination payment will remain exempt from income tax and NICs;
– The NIC rules will be aligned with the tax rules so that employer NIC will be payable on the elements of the payment exceeding £30,000;
Overall, the rules relating to termination payments have been clarified and tightened. It is good news that the £30,000 exemption remains intact but the circumstances in which the exemption applies will in essence be restricted to genuine redundancy situations.
What is clear is that this will remain a contentious area on which specialist advice will still be needed.
For more information, please contact Lesley Sutton on 01484 550037 or email email@example.com.