HMRC confirms when new rules on taxing notice pay apply

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Posted on 28 Feb 2018

HMRC have confirmed that new rules on the tax treatment of notice pay only apply where the payment is made, and the employment terminates on or after 6 April 2018.  

New rules on the way termination payments are taxed come into force in April. All payments in lieu of notice, whether provided for in the contract or not, will have to be treated as earnings (rather than a termination payment) and will be subject to income tax and employer and employee NICs.

HMRC have confirmed that the new rules only apply where the payment is made, and the employment terminates on or after 6 April 2018. The confirmation comes in HMRC’s February Employer Bulletin (page 5).  

Detailed guidance will be provided in the Employment Income Manual “in due course”.  

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