How do the settlement agreement taxation changes affect me? Employment Law

The settlement agreement taxation changes introduced on 6 April 2018 mean that employers are required to tax as earnings the part of a termination payment that is equivalent to the earnings the individual would have received had their notice period been worked in full.

Previously employers had offered tax-free ‘compensation’ for not giving notice, however HMRC has introduced Post Termination Notice Pay to ensure payment in lieu of notice and notice pay generally is subject to usual deductions.

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