Simplification of the tax and National Insurance treatment of termination payments
This consultation has concluded
Detail of outcome
The government has analysed the responses to its consultation on termination payments held in summer 2015 and has set out its response.
The government announced at Budget 2016 that it would make changes to the taxation of termination payments.
The changes include:
- clarifying the scope of the exemption for termination payments to prevent manipulation, by making the tax and National Insurance contributions (NICs) consequences of all post-employment payments consistent
- aligning the rules for income tax and employer NICs so that employer NICs will be payable on payments above £30,000 (which are currently only subject to income tax)
- removing foreign service relief
- clarifying that the exemption for injury does not apply in cases of injured feelings
Consultation on draft legislation
The government has published a follow-up consultation on draft legislation, which explains the policy underpinning the changes in greater depth.
The draft legislation is intended to give effect to the changes, and the government invites views on whether this objective is achieved.
The government is interested in hearing from everyone with a view on this subject, including employers, their representatives, trade organisations and any other interested parties.
Closing date for comments: 5 October 2016
Detail of feedback received
We would like to thank those who took the time to respond to this consultation. We received a large number of detailed comments and are currently considering these. We will publish a summary of the responses in 2016.
This consultation ran from
A consultation on how the tax and NICs treatment of termination payments can be made simpler and fairer.
PDF, 364KB, 34 pages
This file may not be suitable for users of assistive technology. Request an accessible format.
If you use assistive technology (such as a screen reader) and need a version of this document in a more accessible format, please email email@example.com. Please tell us what format you need. It will help us if you say what assistive technology you use.
The government is considering how they can make the tax and National Insurance contributions (NICs) treatment of termination payments simpler and fairer and wants to hear your views on how that can be achieved.
The consultation particularly seeks views on:
- removing the distinction between contractual and non-contractual termination payments and whether this will make it easier for employers and employees to understand
- the design of the new exemption from income tax and NICs
- whether the income tax and National Insurance treatment of termination payments should be aligned
- which of the existing exemptions which remove the liability to income tax should be retained and whether any new exemptions should be introduced
Published: 24 July 2015
Updated: 10 August 2016
- Published a summary of responses with a link to the follow-up consultation on draft legislation.
- Published a full summary of responses and consultation on draft legislation.
- Added detail of consultation outcome.
- Added detail of feedback received.
- First published.