Income Tax (Earnings and Pensions) Act 2003 section 402A

Split of payments and other benefits between sections 402B and 403

Section 402A defines what a "termination award" is and explains how such awards are split between two different tax charging rules — one that treats part of the award as earnings (section 402B) and one that applies the £30,000 tax-free threshold (section 403).

• A "termination award" is any payment or benefit arising because a person's employment has ended
• Part of a termination award may be treated as earnings under section 402B, with the extent determined by the rules in section 402C
• The remainder of the termination award — not caught by section 402B — qualifies for the £30,000 tax-free threshold under section 403
• Payments or benefits arising from a change in job duties or a reduction in earnings (rather than full termination) are charged entirely under section 403