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Chartered Certified Accountants
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Alignment of the tax and NI treatment for termination payments in excess of 30k has been delayed

Changes were due to take effect from 6 April 2018 including the following:

  • Tightening of rules that exempt payments made in respect of suffering injury or disability

  • Treating all payments in lieu of notice as fully taxable and subject to NI

  • Treating ex gratia payments in excess of the £30,000 partial exemption as subject to NI

The last change aligns the NI treatment of excess payments with the tax treatment. Currently, an ex gratia payment of £50,000 would only be charged to tax on the £20,000 in excess of the £30,000 partial exemption but no NI would be charged.

The legislation required to make this change has now been deferred. This means that for the 2018/19 tax year, any payments made in excess of £30,000 won’t attract employees’ or employers’ NI.

If you were fast-tracking redundancies etc. to fall earlier than April 2018 to avoid a bill, there is now no need to do this.

The change is now scheduled to happen from 6 April 2019 instead.

Remember that the other changes are still scheduled to apply for 2018/19 – so don’t fall into the trap of continuing to treat payments in lieu of notice as partially exempt by mistake. From 6 April 2018 these will be subject to tax and NI in full.

06 Mar 2018

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