Last updateTue, 24 Feb 2015 5pm

TAX: PAYE changes to termination payments

27 May 2011  

New HMRC rules could be used by employers as a negotiating tool when making payments to departing executives, reports Ann Casey

On 6 April 2011, the Income Tax (Pay As You Earn) Regulations 2003 were amended, introducing the ‘0T’ tax code to be applied in certain circumstances, including payments made to ex-employees after a P45 has been issued. This affects employees who receive taxable termination payments after they receive their P45. A taxable termination payment is either one that is a contractual payment that is taxable (such as a contractual payment in lieu of notice), or is a non-contractual ex-gratia termination payment above the £30,000 exemption. This change does not affect the general tax treatment of termination payments and the £30,000 exemption.

Last modified on 01 June 2015