Opinion

HMRC rule changes to hit PAYE on termination payments

January does seem to have a 'taxing' theme about it and as if to prove a point, here's another change that from April 2011 will affect readers.

HMRC has announced changes to PAYE regulations that mean from 6 April 2011, employers may need to withhold up to 50 percent of post-termination payments to former employees.

The present system demands that employers need only withhold 20 percent of an employees pay - basic rate income tax - leaving any extra tax for the employee to 'fess up and pay.

From April, the onus moves from the employee to the employer to ensure that the full amounts of tax are withheld.

The changes haven't been published - at the time of writing - but will be on the HMRC website at some point in February 2011.

Just search for CWG2 'Employers Further Guide to PAYE and NICs' Of course, penalties will apply if the rules aren't followed.

This was first published in January 2011

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