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

Skilled Worker Route

The new Skilled Worker Route will go live on 1 December 2020. This route replaces the Tier 2 Sponsorship scheme and is at the core of the new approach to UK immigration policy as the country prepares to leave the EU single market on 31 December 2020. The Home Office has now published an extensive…

Read More
US Immigration

Immigration 2021

We are delighted to announce that the Minister of State for Future Borders and Immigration has agreed to be the keynote speaker and panellist at the last of our virtual Immigration 2021 events on 30 November. As we approach the end of 2020, global mobility policy and practice is at an unprecedented juncture. Three exceptional…

Read More

Furlough Extension Guidance Published – But Many Questions Remain

Employers will be all too aware that until recently it looked as though the furlough, or Coronavirus Job Retention Scheme (CJRS), would end on 31 October 2020 and be replaced by the less generous Job Support Scheme. The CJRS was initially only extended to 31 January 2021. However, on 5 November 2020, Rishi Sunak announced…

Read More