Open Navigation

30K Tax Free Exemption

Reviewing the tax status of an ex-gratia payment

A settlement agreement normally includes a payment, often expressed to be an “ex-gratia” payment, made by the employer to the employee. An ex-gratia payment can be paid to the employee free of tax up to £30,000.

If the payment is genuinely “ex-gratia” ie is not a payment that is due to the employee pursuant to the terms of their contract (salary, notice pay, holiday pay or contractual bonus payments), it may be paid to the employee without any tax deductions up to £30,000 (see section 403 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)). Any payment over that will be subject to income tax in the normal way.

Taxation of ex-gratia payments can be complex and appropriate legal and tax advice should be taken by both the employer and employee before a settlement agreement is finalised.

News

Family Based Immigration

British National (Overseas) – Hong Kong

The new UK immigration rules, enabling residence with permission to work and study for British National (Overseas) citizens who are ordinarily resident in Hong Kong, opened to applicants on 31 January 2021. Who can apply? The primary applicant must be a British National (Overseas) citizen pursuant to the Hong Kong (British Nationality) Order 1986. This…

Read More

Gender-fluid and non-binary employees protected against discrimination

Under section 7 of the Equality Act 2010 (“the Equality Act”), employees are protected from discrimination and harassment related to gender reassignment. A person who  “is proposing to undergo, is undergoing or has undergone a process (or part of a process) for the purpose of reassigning the person’s sex by changing physiological or other attributes…

Read More