Taxation changes from 6 April 2018

  • When making non-contractual termination payments in lieu of notice (excluding holiday pay or bonuses) employers must calculate the post-termination period ‘earnings’ subject to income tax and NICs. The formula to calculate the taxable earnings is:

basic pay x number of months’ notice period – termination payment

Even where there is no contractual pay in lieu of notice clause, these payments will be taxable.

  • Some ‘injury for feelings’ payments that would otherwise have been tax free will no longer be so unless they relate to psychiatric injury or a recognised medical condition.

Key compensation limit changes from 6 April 2018

Employment right (maximum sums)

Previous limit

Current limit (as of 6 April 2018)

Weekly pay



Unfair dismissal basic award/redundancy pay



Unfair dismissal compensatory award

£80,541 (or a year's salary if lower)

£83,682 (or a year's salary if lower)

National minimum wage

For those over 25 who are entitled to the National Living Wage, this will rise from £7.50 to £7.83 per hour. For apprentices it will rise from £3.50 to £3.70 per hour.

Changes to family payments

From 1 April 2018, statutory maternity, paternity, adoption and share parental pay increases to £145.18 per week. Maternity allowance will rise to the same figure on 9 April 2018.

Gender pay publication deadline

The deadline for private and voluntary sector gender pay gap reports for employers with over 250 employees is 4 April 2018.