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Government to consult on the tax treatment of termination paymentsPosted on by Angela Rhodes
Currently, the first £30,000 of any non-contractual termination payment can be paid without any deductions for tax and national insurance.
The Government is considering:
- removing the distinction between contractual and non-contractual payments so that, for example, a contractual provision for payment to be given in lieu of notice which is currently taxable, would attract tax-free status.
- allowing the current fixed £30,000 tax-free sum to change to an amount which increases with length of service
- introducing a qualifying period of two years before an employee is eligible to receive a tax-free termination payment
- making injury to feelings awards which are generally tax free subject to tax for at least some, if not all, of the award.
- £6,000 tax-free sum after two years’ employment, increasing by £1,000 for each additional year of employment.
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