£30,000 Termination Payment Still Intact

8th September 2016


I am sure both employers and employees alike have been waiting with baited breath as to whether or not the first £30,000 which can be tax free as a termination payment was going to be reduced.  Luckily, that amount still remains the same, but there are other changes that are expected to happen and take effect from April 2018.

  1. I am sure everybody is aware of the arguments surrounding PILON clauses, namely whether or not they may attract tax. The government has clarified this stating that all payment in lieu of notice sums will be taxable irrespective of whether there is an express term or not in the contract of employment.
  1. At the moment, some employers have not taxed sums of money that they can attribute to injury to feelings. However, under the new changes, the exemption does not apply in cases of injury to feelings.
  1. The other change is that if you make payments above £30,000, which at the moment are currently only subject to income tax, as of April 2018 onwards, you as the employer will also be paying employers’ NICs.

On a positive note, at least the threshold of £30,000 has not been reduced, which affords employers and employees the ability to enter into serious negotiations to avoid litigation.