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The government has analysed the responses to its consultation on termination payments held in summer 2015 and has set out its response.
At Budget 2016, the government announced 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
The policy underpinning the changes is now explained 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.