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Some payments made on the termination of an employment or office can be paid tax free. Some of these exemptions are often overlooked in practice. See Simon’s Taxes E4.802DA–E4.802F for an overview of exemptions and exceptions.

A payment may be exempt where:

1. •

   it falls within the £30,000 exemption

2. •

   there is a legislative exemption, or

3. •

   it is not treated as employment income in the first place

As discussed in the How could a termination payment be taxed? guidance note, ITEPA 2003, s 401 applies only where a payment is not taxed under another part of the legislation. Using the order of priority set out in that note will assist with assessing whether a payment falls into s 401.

Here, we look at exemptions for those termination payments that are within ITEPA 2003, s 401.