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Senior Partner
Senior Partner, Solicitor
Category: UK Employment Law
Satisfied Customers: 13325
Experience:  30 years experience
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Hello, I am very shortly to be made redundant and my employer

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Hello, I am very shortly to be made redundant and my employer and I are trying to sort my final payroll for 15 October. The amount of my statutory tax-exempt redundancy payment is clear. Can pay in lieu of notice be included as an additional non-statutory redundancy payment and also be treated as tax free, like the statutory piece? What about pay for untaken days of leave accrued? Thank you. Speed is of essence as payroll must be sorted shortly, and the company has had different advice on this than what I interpret from HMRC's website here: Thank you.
Thank you for your question. Pay in lieu of notice can be included in the tax free lump sum only if it is not a contractual payment. In other words if the employer terminates your employment without notice in breach of contract and you get the payment as compensation then it is not taxable but if the contract allows the employer to pay in lieu of notice or you simply agree that you are not required to work during your notice period then the notice is contractual and subject to tax.

Accrued holiday pay is a contractual entitlement and subject to tax
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