EIM13505 - Termination payments and benefits: section 401 ITEPA 2003: £30,000 threshold: general

Sections 403 to 404 ITEPA 2003

With effect from 6 April 2018, an element of all payments received in connection with the termination of a person’s office, or employment are chargeable to income tax as general earnings. EIM13874 defines the term ‘relevant termination awards’ and explains that relevant termination awards are split into 2 elements:

• post-employment notice pay (PENP)
• termination awards subject to section 403 ITEPA 2003

Section 403(1) ITEPA 2003 provides that payments, and benefits that fall within section 401(1)(b) and (c) ITEPA 2003 and ‘termination awards subject to section 403 ITEPA 2003’ count as employment income (see EIM00510) only to the extent that they exceed £30,000. The £30,000 figure is described as a threshold. This threshold does not apply to post-employment notice pay.

Prior to 6 April 2018 all payments and benefits within section 401(1) ITEPA 2003 were subject to section 403(1) ITEPA 2003 and the £30,000 threshold.

Some payments and benefits must be added together before applying the threshold, producing an aggregate. EIM13530 explains when this must be done.