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Termination payments: What a minefield!

By Reshma Johar, January 2021

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. 
  • Foreign service relief will only be available to employees not resident in the UK for the tax year in which

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