The golden handshake is usually given under settlement agreements.
From April 2017 the Government is making changes to settlement agreements that has an impact
on the tax and NIC payable.
Previously settlements could be given a boost if the employment contract didn’t have a “notice in lieu” clause. The Government is doing away with this in April. Notice for senior employees can be from 3 months to 12 months or more, this would have a considerable impact on the worth of termination payouts.
●Settlement payments (except payments relating to notice) up to £30,000.00 will remain
●Any termination payment that relates to the employee’s notice will be subject to tax. This is
regardless of the PILON (pay in lieu of notice) being contractual or not.
●All termination payments in excess of the £30,000.00 tax-free allowance will be subject to NI
contributions as well as income tax deduction.
Employers may have to think about grossing-up their settlement packages to account for the extra
tax payable and keep the appeal of the offer. This in turn means added cost to the employer.
If you are facing a situation where a settlement is a potential way forward, you can call us to discuss your options on 0113 386 9270.