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HMRC internal manual

Employment Income Manual

Termination payments and benefits: year for which the payment or benefit is income

Section 403(1) and (2) ITEPA 2003

A payment or benefit within section 401 ITEPA 2003, which is not post-employment notice pay, is specific employment income (see EIM00510) and is assessed to tax in the year in which it’s received (as defined in EIM13110). Chapters 4 and 5 of Part 2 ITEPA 2003 do not apply to specific employment income. So, it’s not necessary to establish when the payment or benefit is ‘for’.

Post-employment notice pay is also assessed to tax in the year it’s received. However, as post-employment notice pay is general earnings it is subject to sections 16 and 17 ITEPA 2003. These sections set out when general earnings are ‘for’ (see EIM40008). Post-employment notice pay is ‘for’ the last tax year in which the employment was held (section 17(3) ITEPA 2003).