From April 2018, more payments on leaving employment may be taxed, which takes away the old exemption for non-contractual payments.
Any payment which is equal to the net pay someone would have earned had they been required to work their notice, will be subject to PAYE and NIC. This is even if they are asked to leave without working their notice, or part way through the notice period.
Amounts over that, will be classed as termination payments and entitled to the £30,000 exemption, provided there is no contractual entitlement.
Redundancy payments will always fall within this category.
Please also note that from April 2019, employer NIC will also be due on termination payments over £30,000.
If you have any questions or queries, please do not hesitate to contact your SFB’s Tax Managers Amy Hook and Sarah-Jane Statham by emailing email@example.com.