The government has rejected calls for an increase on the cap for tax-free redundancy payments.
Employers can currently pay axed staff a compensation payment of up to £30,000 before income tax kicks in.
However, this limit has existed since 1987, and Jonathan Maude, head of the employment group at law firm Hogan & Hartson, believes raising it would be good for everyone in the current economic climate. Figures from HBOS show that a house in London worth £100,000 in 1987 would be worth £377,200 today.
“It is in both the employer’s and employee’s interest that it’s raised,” Maude told Personnel Today. “A higher tax-free limit would be a very useful weapon for HR in the settlement armoury, giving parties more room to manoeuvre.
Graham Farquhar, partner at professional services firm Ernst & Young, said reviewing the exemption figure would help employees in lower paid industries such as retail.
But HM Revenue & Customs said there were no plans currently to change the cap.
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“All taxes are kept under review at all times, and any changes to the cap would be for ministers to decide,” a spokesman said.
A CBI spokesman said raising the tax-free threshold could force employers to increase redundancy payments against their will.
