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Pilon Changes

Pilon Changes

There are more tax changes in the pipeline which you as an en employer, or prospective employer of domestic/household staff need to be aware.

It is some way off yet, but there are changes forthcoming which will affect payments made at the termination of employment, in Lieu of notice, which will affect all employees including domestic and household staff.

They are to take effect in 2018 and follow the government’s analysis of its consultation on termination payments in lieu of notice (PILON) which has now been completed.

In essence, The changes include:

  • clarifying the scope of the exemption for termination payments to prevent manipulation, by making the tax and National Insurance contributions (NICs) consequences of all post-employment payments consistent
  • aligning the rules for income tax and employer NICs so that employer NICs will be payable on payments above £30,000 (which are currently only subject to income tax)
  • removing foreign service relief
  • clarifying that the exemption for injury does not apply in cases of injured feelings

The new changes will make all pay in lieu of notice taxable whether or not the employee has a contractual right to such a payment.

Currently, employees with contractual rights to PILON payments are taxed, while non-contractual PILON payments can qualify for the £30,000 exemption.

Watch this space, we will keep you in touch.