Payroll, Pension & Expenses

Termination Payments [Draft]

Tax and NIC on termination payments
Last Updated:
1/25/2022 3:13:49 PM
Termination of employment can be a tricky area and we’re by no means legal experts, so we advise you seek legal advice. However, we have created some internal advice for Quantico’s FinOps Managers.

Steps to take
Review why the employment is ending,
Determine how much the individual is paid,
Based on the above determine the correct NIC and income tax treatment
Report termination payment to HMRC (typically via normal payroll reporting)

*Note Xero payroll will correctly calculate tax treatment if the data is input correctly.

Step 1
Employees can leave a business for various reasons we outline the most common below:

Termination Reasons
Redundancy - Must be able to prove the job no longer exists
Retirement
Termination
Resignation
Step 2
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