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Changes to the taxation of notice pay upon termination of employment

For many years, the taxation of termination payments has been a vexed area.

Friday 9th of February 2018 15:37

Employers and employees have been able to take advantage of the HMRC concession where the first £30,000 of compensation upon termination of employment can be paid without deductions for tax and national insurance. Generally speaking, redundancy payments, genuine ex-gratia and compensation payments fit into this HMRC concession, but more care was required where the parties were seeking to argue that notice pay should fit within that HMRC concession, such that it would be paid without any deductions.

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