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Tax aspect to saying goodbye

Tax implications of saying goodbye set to change

While you may want to pay the correct amount of tax when organising a termination payment, the complexities of the system can be an issue as the various elements are subject to different tax and national insurance treatment. However, HMRC finds that some that some employers and advisors manipulate the nature of the payments in order to enjoy the current £30,000 exemption.
To deal with this, the Office of Tax Simplification (OTS) is currently carrying out a consultation, which will run for three months to consider:
o Aligning tax and national insurance treatment.
o Subjecting termination earnings to both tax and national insurance via payroll processes.
o Introducing a new exemption linked to redundancy.
o Exempting compensation payments for unfair/wrongful dismissal or discrimination
o Keeping injury or disability payments and to members of HM Forces.
New anti-avoidance proposals forming part of the consultation are that exemptions will not apply to any part of a termination payment relating to a salary sacrifice arrangement, or workers on fixed-term contracts or to employees who are re-engaged by the same company (or associated company) within 12 months.
One thing is for certain is that we will be saying goodbye to the £30,000 exemption currently allowed with termination agreements!
For more information about this, ring Christine Wallwork on 0161 482 7962 or email

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