Income Tax (Earnings and Pensions) Act 2003 section 309

Limited exemptions for statutory redundancy payments

Section 309 provides limited exemptions from income tax for statutory redundancy payments and approved contractual payments made on termination of employment.

• Statutory redundancy payments and approved contractual payments are generally exempt from income tax as earnings
• Where an approved contractual payment exceeds the statutory redundancy amount that would have been due, the excess is taxable
• These payments are also exempt from tax as other employment income, unless the termination payment rules in Chapter 3 of Part 6 apply
• Any statutory payments from the government in respect of these amounts are treated as paid on account of the redundancy or contractual payment