Termination payments ― overview

Produced by a Tolley Employment Tax expert
Employment Tax
Guidance

Termination payments ― overview

Produced by a Tolley Employment Tax expert
Employment Tax
Guidance
imgtext

Termination payments are payments made to an individual relating to the loss of their job. They can take the form of cash, benefits or both. Termination payments will either be fully taxable, partially taxable or fully exempt depending on the nature and the amount of the payment. Although widely referred to as termination payments, this also applies to payments in relation to a change in the duties of employment or a change in the earnings of that employment. This note therefore covers payments related to retirement, redundancy, dismissal, death, resignation, the nature of the role being changed or a change in pay for the employment. A termination payment may also be referred to as a ‘golden handshake’.

Depending on the circumstances, termination payments can be categorised as one of the following, each with their own tax and NIC treatment:

  1. •

    earnings ― see the Taxation of cash employment termination payments guidance note

  2. •

    benefits ― see the Taxation of non-cash employment termination payments guidance note

  3. •

    restrictive covenants ― see the Taxation of payments for restrictive

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
Powered by Tolley+™
  • 01 Jul 2025 12:40

Popular Articles

Bad debts

Bad debtsBad debts usually arise where goods or services have been provided to a customer, for which payment has not been received within a reasonable or specified time period, or for which the customer is unable to pay. It is necessary to determine the quantum of relief that can be claimed for bad

14 Jul 2020 15:34 | Produced by Tolley Read more Read more

Self assessment ― amendments and corrections

Self assessment ― amendments and correctionsOnce a self assessment tax return has been filed, both HMRC and the taxpayer (or the agent) has the right to make changes to the return. There are different time limits depending on whether it is a correction by HMRC or an amendment made by the

14 Jul 2020 13:37 | Produced by Tolley Read more Read more

Payroll record keeping

Payroll record keepingUnder SI 2003/2682, reg 97, “...an employer must keep, for not less than 3 years after the end of the tax year to which they relate, all PAYE records which are not required to be sent to [HMRC]...”. Reasons for keeping the records include:•being able to calculate tax and

14 Jul 2020 12:52 | Produced by Tolley in association with Ian Holloway Read more Read more