Starting a new business? Get 40% off our accountancy services for 3 months! 😎


The way that termination payments are taxed by employers is about to be changed from 6th April 2011. Any business that makes a termination payment to an employee after he has left and a P45 has already been issued, deducts tax at the Basic Rate which is currently 20 percent. From April 2011 tax will be deducted from termination payments not included on the P45 at the taxpayers marginal rate of tax, using a tax code of 0T. For higher rate taxpayers this will be 40 percent, and for additional rate taxpayers with income over £150,000 will be 50 percent.

The current rules allow the tax to be deducted at 20 percent, which will be reviewed when the taxpayer submits their self assessment tax return. In some cases where more tax should have been deducted, this effectively provides extra cash in the taxpayers pocket until he has to pay what is owed to the taxman.

The new rules could result in some taxpayers who leave employment, especially those that don’t take up further employment, out of pocket until the year end or until they submit their tax return.

Guidance is to be issued by HM Revenue & Customs around February 2011, which doesn’t leave much time for employers to digest the new rules and finer details. For many businesses, a small business accountancy would take care of any termination payments, ensuring that they are taxed correctly. Accountancy firms have access to the amendments in legislation by HMRC and will implement changes in a timely manner.

About The Author

Gary Fields

Content Writer working alongside our expert accountants to bring you the latest Tax and Accounting news.

More posts by this author
Notify of
Inline Feedbacks
View all comments

Read more posts...

What is a Non-Established Taxable Person for VAT?

There are special VAT rules in place for online sellers who are classed as non-established taxable persons (NETPs), and use an online…

Read More

The Accountancy Partnership – Our Positive Reviews

Here at The Accountancy Partnership, we’re proud of our customer reviews The reviews we receive from our customers show how hard we…

Read More

What Type of Legal Structure Should I Choose When I Start a Business?

The structure that you choose when you start a business affects how the business operates, the amount of tax you pay, how…

Read More
Back to Blog...

Confirm Transactions

The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?

Yes, submit my quote
No, let me change it

Please contact our sales team if you’re unsure

VAT Returns

It is unlikely you will need this service, unless you are voluntarily registered for VAT.

Are you sure this is correct?

Yes, the business is VAT registered
No, let me change it

Call us on 020 3355 4047 if you’re not sure.


You will receive our bookkeeping software Pandle for free, as part of your package.

You can use this to complete your own bookkeeping, or we can provide a quote to complete your bookkeeping for you.

Please select and option below:

I will do my own bookkeeping
I want you to do my bookkeeping

Call us on 020 3355 4047 if you’re not sure.