The Government has started consulting on simplifying the tax element of termination payments. The proposals are to:-
- Remove the distinction between contractual and non-contractual payments.
- Change the current £30,000 tax free sum to an amount which would increase with the length of an employee’s continuous employment.
- Introduce a two year qualifying period before an employee can receive a tax free payment.
- Make injury to feelings awards subject to tax for some or all of the damages awarded.
No specific thresholds are set out yet, however it can only mean a significantly reduced tax free sum being available in the future. We will keep you updated as the consultation progresses.