Lump sum payments


You may receive a lump sum payment on redundancy or retirement from your employer. A lump sum payment on termination of employment may be exempt from tax, or may qualify for tax relief.

You will only be liable to pay tax on the amount of your payment that is more than either:


A lump sum paid under the terms of a contract of employment is taxable in full. These lump sum payments do not qualify for exemption or relief.

This section refers to lump sum payments received following your redundancy or retirement. It does not include information on your pension scheme lump sum. For further information on the taxation of pension lump sum payments, please see Taxation of retirement lump sums.

Payment in lieu of notice

Your employment contract may provide for payment in lieu of notice. If so, this part of the lump sum will be taxable as pay and exemptions do not apply. If it does not, this part of the lump sum may be included in your lump sum termination payment and may qualify for the exemptions.

Next: Basic exemption