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Termination Payments - proposed changes from April 2021

24 July 2020      Julia Ascott, Employment Taxes Specialist

HMRC has issued a policy paper setting out an alternative method for calculating Post Employment Notice Period (PENP) applicable from April 2021.  It also aligns the tax treatment of PENP for UK resident and non-resident employees.  Read the policy paper here.

Key points:

  • From April 2021 the alternative method for calculating PENP can be used for those employees whose pay period is in months, but their notice period is not in whole months
  • Currently, the PENP is not taxable if an employee is not resident in the UK in the tax year they receive the termination payment.  non-resident employees are not charged to tax/NIC on their termination payment.  From April 2021, the PENP will be taxable for non-resident employees to the extent that they would have worked their notice period in the UK

BUFDG will be updating the termination payment guidelines shortly.  If there are any particular examples you would like included in this document, please email me.



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