Illustration - termination payments

In this lesson

1. 0:00 Termination payments illustration overview
2. 0:38 Identifying exempt versus taxable payments
3. 1:34 Income tax computation structure
4. 2:01 Calculating employment income working
5. 3:00 Termination payment exemptions explained
6. 4:00 Applying tax rates and bands
7. 5:28 Final income tax liability calculation

About this lesson

You'll learn to identify which elements of a redundancy package are exempt, which are taxable, and crucially, how the £30,000 exemption interacts with statutory redundancy payments. The example walks you through calculating employment income for a partial year, handling post-employment benefits like company car use, and then building a full income tax computation where termination payments sit at the top slice of income. This is essential exam technique for papers covering employment income and termination benefits. You'll see how to structure your workings clearly, showing which payments are exempt and why, and how to correctly apply the exemption limit when statutory redundancy has already used part of it. The computation demonstrates the tax treatment of termination payments as non-savings income, taxed after dividends and other income sources, and how to allocate them across basic and higher rate bands when the basic rate threshold has already been exceeded.

Duration: 6m