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HMRC internal manual

Employment Income Manual

Termination payments and benefits: Section 401 ITEPA 2003: exceptions: payments on death

Section 406(a) ITEPA 2003

A payment or benefit given in respect of the termination of an office or employment by the death of the holder is exempted from tax under Section 401 ITEPA 2003.

Note: a payment made on an employee’s (or ex-employee’s) death may be chargeable under Section 394 ITEPA 2003 rather than Section 401 ITEPA 2003 if a non-approved or employer-financed retirement benefits scheme exists (see EIM15000 and in particular EIM15020 onwards).