The Office of Tax Simplification (OTS) have published a review of employee benefits. They are seeking to simplify the tax system whilst also making tangible increases in HMRC’s revenue. One of the main proposals is to remove the £30,000 tax free exemption for termination payments. They state that this is too confusing and HMRC should simplify the rules so that only statutory redundancy payments will be tax free. The present maximum statutory redundancy payment is £13,920.
Furthermore another proposal is that National Insurance Contributions (NIC) would be payable on the whole of the termination payment, other than the statutory redundancy amount. Presently any sum in excess of the £30,000 exemption is paid free of NIC. This proposal will be considered by the government and legislation may be put in place after further consultation. However the OTS have suggested that there needs to be more research on who will be the winners or the losers, however it would appear at first reflection there will simply be more losers!
Please let us know your thoughts? Is the present system on termination payment too complicated? Would you welcome more simplicity or a higher tax free amount?