Taxing Termination

8 March 2018

Grading and Salaries
Any termination payments made on or after 6th April 2018 must comply with the Finance Bill 2017:-

-    Any tax-exempt payment up to £30,000 will be subject to employer National Insurance contributions (employee contribution for up to and above £30,000 payments remains exempt).

-    A payment made in lieu of notice (PILON) is not tax exempt and cannot be referred to as a “termination payment” for the purpose of avoiding the tax payable by both employer and employee.

The new rules simplify the process and particularly for PILON however, this will have financial implications on employers which should be considered when agreeing to terms for a settlement agreement to terminate employment.