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Chartered Certified Accountants
and Business Advisors

01530 267320

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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