Are severance payments free of tax, NI contributions or pension contributions?
Liability to tax and NI will depend on current legislation and on personal circumstances. Individuals should therefore check their personal position before signing a compromise agreement. As a guide, however, current legislation can allow for voluntary severance payments to be paid without deduction of tax and national insurance up to a maximum of £30,000. Any payment made above this amount will be subject to tax and national insurance.
Related Questions
- If I am currently in the process of allocating Tax Relief to cover the Pension and/or 401(k) contributions, do I need to make contributions until the Tax Relief has been allocated?
- Pension contributions (personal or EPP) - is the maximum tax free pension limit calculated as a percentage of deemed emoluments or actual salary?
- Payments & Deductions - Can you explain the Apply Before Tax and NI / After Tax and NI categories?
