Sarah Bradford explains the calculation of ‘post-employment notice pay’ and when the simpler and alternative calculations for monthly paid staff can be used.
The extent to which a termination award benefits from the tax-free £30,000 threshold depends largely on whether the award is greater than the post-employment notice pay. The relevant legislation is ITEPA 2003, Pt 3, and in particular ss 402A-404.
A termination award is a payment or other benefit that is received directly or indirectly on the termination of a person’s employment. Termination awards not benefitting from the £30,000 threshold are taxed as earnings (ITEPA 2003, s 492B), whereas any part of the award that benefits from the threshold is tax-free up to £30,000. The legislation prescribes (in ITEPA 2003, s 402C) the rules for determining the extent to which a termination award is
