Introduction to Income Tax and NICs Starters and Leavers
Do not operate the employee’s normal tax code
Do not issue an amended P45 form If the payment was a ‘standard’ type payment (s uch as final payment of salary, bonuses, and so on), then the employer should write to the ex- employee giving details of the date and the amounts of the payment and tax deducted
•
• Use the tax rates and bands in force at the time of the payment Therefore, if an employee leaves in March but a payment is made in the following May, the tax rates and bands in force in May are used.
Note that PAYE income tax is still operated on any payment made on the death of an employee.
There are some additional procedures where a payment comprises one or more ‘termination’ payments , such as redundancy pay. However, these are beyond the scope of this course.
7.2.2 NICs implications
Special NICs rules apply to payments that are made after the employee has already left. • If the payment is the final payment of salary or wage, then NICs are calculated using the usual earnings period and the usual NICs category letter. • NICs on any ‘irregular’ payments ( such as holiday pay, unexpected bonus, arrears of pay following a backdated pay award) must be calculated using: ‒ A weekly earnings period, regardless of how the employee was normally paid ‒ The usual NICs category letter
• The NICs rates and limits in force at the time of payment are used.
If the employee has died, then no NICs are due on any payment.
7.3
Appendices
7.3.1 Abbreviations
DWP
–
Department of Work and Pensions
FPS
–
Full Payment Submission
HMRC
–
HM Revenue & Customs
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