It has been confirmed that the reform of the tax rules relating to termination payments will take effect from 6 April 2018 and will include the following:
- All contractual and non-contractual payments in lieu of notice (PILONs) will be taxable as earnings;
- The first £30,000 of a genuine termination payment will remain exempt from income tax and NICs;
- The NIC rules will be aligned with the tax rules so that employer NIC will be payable on the elements of the termination payment exceeding £30,000;
- Foreign service exemptions are to be removed.
The rules relating to termination payments have been clarified and tightened. Individuals will be pleased the £30,000 exemption remains intact but will find that the circumstances in which such exemption will in essence be restricted to genuine redundancy situations. It will remain a contentious area on which specialist advice will still be needed.