0191 257 0355

71 Howard Street, North Shields
Tyne & Wear, NE30 1AF


Treatment of termination payments

Source: HM Revenue & Customs | | 10/04/2018

With effect from 6 April 2018, employers will need to pay income tax and Class 1 national insurance contributions (NICs) on certain parts of termination payments made to employees whether or not these payments are contractual. The element that is liable to taxation is the amount of the termination payment that represents a payment in lieu of notice, commonly referred to as 'PILON'. The measure will mean that all PILONs rather than just contractual PILONs will be treated as taxable earnings.

In addition, all employees will pay income tax and Class 1 NICs on the amount of basic pay that they would have received if they had worked their notice in full, even if they are not paid a contractual PILON. This means that the tax and NICs consequences will be the same for everyone and will not be dependent on how an employment contract is drafted or whether payments are structured in some other form, such as damages.

The changes apply to payments, or benefits received on, or after, 6 April 2018 in circumstances where the employment also ended on, or after, 6 April 2018. Foreign service relief on termination payments has also been removed for all UK residents, apart from seafarers from 6 April 2018.

Planning note

The introduction of employer NICs on termination payments above £30,000 and on sporting testimonials of more than the £100,000, which were also expected to take effect from 6 April 2018, is delayed until 6 April 2019.

 

Latest News

  • Tenth anniversary of first Debt Relief Order

    16/04/2019 - More...

    Debt Relief Orders (DROs) were first introduced in April 2009. The DROs assist people who have small levels of assets and insufficient surplus income to deal with debts under

  • Estate Agents targeted

    16/04/2019 - More...

    HMRC has launched an unannounced crackdown on money laundering regulation non-compliance by estate agents. This clampdown resulted in over 50 visits by HMRC staff to estate agents

  • Job related expenses you can claim against your tax

    16/04/2019 - More...

    If you are an employee and use your own money to buy things that you need for your job, you may be able to claim tax relief for the associated costs. It is usually only possible to

Newsletter

With our newsletter, you automatically receive our latest news per e-mail and get access to the archive including advanced search options!

» Sign up for the newsletter
» Login

Copyright © 2019 - Read Milburn