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A sense of déjà vu
Key points
- Some termination payments are fully exempt from both income tax and National Insurance.
- A termination payment that is a reward for services is taxable in full.
- Payments to a pension scheme and statutory redundancy payments are fully exempt.
- Does an employee have a contractual entitlement to a termination payment?
- A £30 000 exemption from income tax applies only to a genuine ex gratia payment.
- A payment to an employee on their retirement will be treated as made from an employer financed retirement benefit scheme.
- Post-employment notice pay is treated as earnings and subject to income tax and National Insurance.
It’s first thing Monday morning and I’m just passing through reception when my boss’s secretary beckons me over: ‘He wants to see you urgently. Be warned he’s in a sombre mood.’
Oh dear this does not bode well. My boss is such a jovial person. He can always find a ‘positive’ in even the...
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