E4.802B Termination payments—key changes applicable from 6 April 2018
The taxation of termination payments has undergone a substantial reform, with changes to the legislation, notably in ITEPA 2003, taking effect from 6 April 2018. All payments in lieu of notice (PILONs), where the employment contract is ended after 6 April 2018, are chargeable to income tax and Class 1 National Insurance Contributions (NIC), whether or not they are contractual payments1. This legislation introduces the concept of post-employment notice pay (PENP) which broadly represents notice pay, but valued with reference to a specific calculation set out in the legislation.
The legislation treats as earnings from employment the amount of the termination award paid to an employee
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