Income Tax (Earnings and Pensions) Act 2003 section 404

How the £30,000 threshold applies

Section 404 explains the rules for aggregating termination payments and benefits against the £30,000 tax-free threshold, and the order in which the threshold is allocated when payments are received at different times or from associated employers.

• All termination payments and benefits from the same employment, different employments with the same employer, or employments with associated employers must be aggregated against a single £30,000 threshold.
• Employers are considered associated if one controls the other, or both are controlled by the same third party, on a relevant termination or change date — and this includes their successors.
• When payments and benefits are received across different tax years, the £30,000 exemption is used up against earlier years first before being applied to later years.
• Within a single tax year where the threshold is exceeded, the exemption is applied first against cash benefits in the order received, with any remaining balance then set against the total of non-cash benefits for that year.