The following Employment Tax guidance note Produced by Tolley in association with Sue El Hachmi of Osborne Clarke LLP provides comprehensive and up to date tax information covering:
A cash payment received on termination may be taxable depending on the nature of the payment and any available reliefs. To understand whether a cash payment is subject to income tax, see the How could a termination payment be taxed? guidance note.
The termination package may be made up of arrears of salary, bonuses and other sums which the employee is entitled to from the employment or a compensatory sum and other sums only paid because of the termination. Some cash payments may be exempt from tax, see the Non-taxable termination payments guidance note. The references below to termination payments refer to all these payments unless stated otherwise.
Any cash payment of contractual remuneration is to be treated as earnings and taxed through the PAYE system. Tax is deducted from the payment by the employer and paid through the employer’s payroll.
The payment may also be subject to Class 1 national insurance contributions (NIC). Any employee primary Class 1 NIC will be collected at source in the same way as income tax. Where primary Class 1 NIC is due, the employer also has to pay employer’s secondary Class 1 NIC. The employer may not recover these secondary contributions from the employee.
The collection of income tax and NIC is governed by different rules and is also different depending on when the payment is made.
Non-cash benefits may also be included in the termination package. See the Taxation of non-cash payments guidance note.
Most employers have to report PAYE information in real time since 6 April 2013. This system is known as RTI. See the Real time information guidance note for more background. Payroll reporting is on Full Payment Submissions (FPS).
An employer has always been required to issue a P45 to an employee on leaving. This provides the employee’s tax history for that tax year. Employers are still required to issue P45s under RTI. However, the e
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
Interest can best be thought of as compensation for the use (or retention) by one person of a sum of money which belongs to another. Therefore, in order for a payment to be interest, there must be a principal sum on which the interest is calculated and both amounts (the principal and the interest)
IntroductionTax equalisation is widely used by multi-national companies or group moving employees from one country to another. It is not a statutory concept but is an arrangement between an employer and employee.The idea behind tax equalisation is that an employee accepting an assignment somewhere
Following Spring Budget 2020, statutory sick pay (SSP) rules were changed temporarily to help workers affected by the coronavirus (COVID-19) outbreak. The Chancellor confirmed the Prime Minister’s previous announcement that SSP will be paid from day 1 rather than day 4. Updated guidance on the
IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s