Draft legislation on termination payments

Draft legislation on termination payments

The Government has issued draft legislation expected to take effect in April 2018.


The first £30,000 of a termination payment will remain exempt from tax. However, proposed changes include:


  • The Government intends to remove the confusion as to when a payment in lieu of notice will be taxable. Any payment that the employee would have received if he or she had worked his or her notice period will be subject to deductions for tax and Class 1 NICs, even if the employee is asked to leave employment immediately or part way through his or her notice period.
  • Employer NICs will be payable on payments above £30,000 (which are currently only subject to income tax).
  • The foreign service relief exemption for termination payments will be removed.
  • The legislation will make it clear that the exemption for injury does not apply in cases of injured feelings.
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