Guidance for termination payments made on, or after, 6 April 2018
09 April 2018
Guidance has now been made live on GOV.UK for the new rules for termination payments made on, or after, 6 April 2018.
Payments in lieu of notice
Changes to the taxation of non-contractual payments in lieu of notice (PILONs) came into effect from 6 April 2018. All payments in lieu of notice on, or after 6 April 2018 are chargeable to income tax and Class 1 National Insurance Contributions (NICs), whether or not they are contractual payments.
Foreign Service relief
Foreign Service relief on termination payments has been removed for UK residents from 6 April 2018. Employees whose employment terminated on, or after, 6 April 2018 and who receive a payment or benefit in connection with that termination will not be eligible for tax relief in respect of any period of foreign service undertaken as part of their office or employment if they are UK resident for the tax year in which their employment is terminated. Seafarers remain eligible for Foreign Service relief.
Detailed guidance can be found in the Employment Income Manual and the National Insurance Manual on GOV.UK.