Termination payments - changes to the rules
First change. In yr.2, iss.11, pg.4 we examined the post-employment notice pay (PENP) rules on the taxation of termination payments (see Follow up ). A new Finance (No.2) Bill will amend the rules in two ways from 6 April 2021 (see Follow up ). Firstly, there’s an alternative PENP calculation for employees paid by equal monthly instalments whose “post-employment notice period” isn’t a whole number of months.
Pro advice. You’ve had this option of using this alternative calculation, where it’s advantageous to the employee, since October 2019 on an extra-statutory basis. But from 6 April 2021 it will be mandatory for all employees who meet the above criteria.
Second change. The second change will bring PENP within the charge to UK tax for individuals who are non-resident in the year of termination of their UK employment.
Pro advice. The changes apply to employees who have their employment terminated and receive a termination payment on or after 6 April 2021.
Previous article on the taxation of termination payments
Finance (No.2) Bill
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