How do I calculate the income tax and NICs due when an ex-employee exercises their options several months after leaving the company?
A. If an employee exercises their options more than 6 weeks after receiving their P45, you should operate a 1-week earning period for NICs purposes, and tax must be calculated at basic rate. This rule applies generally to earnings payments made after employment has ceased. Any higher-rate tax due must be reported in the individual’s Self-Assessment Return. The individuals concerned should therefore consider referring to the supplementary pages relating to Share Schemes.
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