Reshma Johar considers the need for extra due diligence when it comes to understanding termination packages.
Can we still assume that termination payment will be covered automatically by the £30,000 tax free exemption?
Where are we now?
Since 2018, there have been numerous changes to termination payments:
- Payment in lieu of notice (contractual or not), will be assessed to PAYE and National Insurance contributions (NICs). This has been introduced with a post-employment notice pay (PENP) calculation.
- Termination payments over a £30,000 threshold will be subject to Class 1A NICs.
- ‘Clarification’ that injury to feelings will not be covered by the exemption.
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Foreign service relief will only be available to employees not resident in the UK for the tax year in which