Termination payments

In this lesson

1. 0:00 Introduction to termination payments
2. 0:43 Fully exempt termination payments
3. 1:21 Fully taxable termination payments
4. 2:57 Partially exempt payments and the £30,000 allowance
5. 4:11 Notice period payment rules
6. 5:38 Tax treatment and income tax implications
7. 6:55 Benefits provided after termination

About this lesson

This is an Advanced Taxation topic that carries significant marks, so mastering the rules around statutory redundancy, contractual payments, ex gratia payments, and post-employment notice pay is essential for exam success. The lesson covers when payments are taxed as employment income versus termination income, how the £30,000 exemption works, and the national insurance implications for both employees and employers. The video walks you through each category with clear definitions and practical examples. Fully exempt payments include statutory redundancy, pension lump sums, and workplace injury payments. Fully taxable payments cover contractual entitlements, expected payments based on workplace practice, and post-employment notice pay. Partially exempt payments—like genuine ex gratia bonuses and non-contractual benefits—are subject to the £30,000 threshold, which means only amounts above this limit are taxable. You'll also explore how gardening leave, benefits provided after termination, and asset gifts are taxed, plus which payments trigger national insurance contributions and which don't. Understanding these distinctions is critical because termination payments are treated differently from regular employment income and can significantly affect a client's tax liability. The lesson emphasises that statutory redundancy eats into the £30,000 exemption, so calculating the taxable portion requires careful layering of payments. By the end, you'll be confident applying these rules to exam scenarios and real-world redundancy situations.

Duration: 8m