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Legal Updates

Tick-Tock for Tax - Post Termination Payments

07 January 2011 #Employment


Come April 2011 there will be a significant change to the treatment of income tax on post termination payments made to employees.
 
Currently, if payment is made post P45 employers can deduct income tax at the basic rate of 20% with any surplus tax liability being the responsibility of the employee during self-assessment (for those higher tax payers).  However, the change set to come in play will see employers being responsible for deducting income tax for the full amount of tax, up to 50%, depending on the tax band in which the employee falls. 
 
Employers will therefore have to make sure that any severance agreements or termination payments from April 2011 comply with the changes and must not just agree to deduct the basic rate of tax.  If they don`t they could face being challenged by HMRC for the recovery of the remaining tax liability.  
 
Please see our blog for further information or if you want to make a comment.
Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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