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HMRC internal manual

Employment Income Manual

Employment income: holiday pay

Section 62 ITEPA 2003

Holiday pay is normally taxable as earnings of the holiday period. But where a scheme provides for it to be received earlier, for example, by short-term employees who are paid it on leaving, or by the representatives of a deceased employee, it should be treated as income arising at the time of receipt.

As regards deduction of tax from holiday pay under Stamp Fund Schemes see Chapter 2 of the Employers’ Further Guide to PAYE and NICs (Booklet CWG2).