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If someone is getting 6 months in lieu of notice and it is a large amount. What is the correct way to deal with this. The first 30K is not ni'able and taxable but should the rest be paid outside the payroll and a cheque sent to the tax office should this be taxed at BR or OT .Thanks
Optional Information: Province/Country relating to question: uk Already Tried: Nothing
Hi
Thanks for your question
All pay in lieu is liable to tax, and if not paid with the last salary payment, and instead paid as a lump sum after employment has ceased, should be taxed OT
The tax free £30,000 only relates to statutory redundancy, and other elements of any leaving package have to be considered as to whether they are taxable
Thanks
Sam
The payment is part of a compromise agreement and the description has been given as compensation not Pay in lieu (sorry). The Solicitor has confirmed that the first 30,000. should be tax free and NI free for both Employees and Employers, can you confirm this.
But the pay in lieu that is taxable is 6 months worth and over 100,000.00 can this still all be paid in one tax period final pay?
Thanks for your response and the additional information
Then the first £30,000 of the compensation can be paid tax free, but anything over and above will be liable to tax, as will the pay in lieu.
I am unsure what you are asking, when you state "can this still be paid in one tax period final pay"
When was/is your final working day, and when is it proposed that the lump sum payment is to be made.(as usually this is made after the employment has ceased, even if a day or two later)
Hi Sam
Sorry for not being clear, I am really asking if some of it is a payment in lieu for 6 months. Can the six months be paid in one tax period.
Yes - as its meant to be a single payment made, to represent the fact that you do not need to work the notice period as dictated to by your employment contract, or the agreed period of time.
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