Changes to the way in which certain elements of a termination payment are taxed have been a long time in the making. Back in 2015, there was a feeling that something needed to be done about the way in which termination payments were taxed – the question was what?

A consultation paper was published in July 2015 to review the distinction between contractual and non-contractual termination payments should be removed, whether the income tax and national insurance treatment of termination payments should be aligned, the design of a potential replacement to the £30,000 exemption and whether exemptions available on the termination of employment should be retained.

At the 2016 Budget it was announced that some changes would be made to the taxation of termination payments. These would include: