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Tax free pay

Are there any circumstances under which one can make a tax free payment to an employee who leaves early in order to use up their holiday entitlement.
Eric Macias


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22nd Aug 2000 13:43

Payment in lieu of Notice
If an employee's has a payment in lieu of notice (pilon) clause in their contract
then all payments when they leave are fully taxable.

If no pilon exists then any payment in lieu of notice will be tax free up to £30,000

I'm 90% sure that holiday pay counts as payment in lieu of notice but I recommend you check this with an empoyment law specialist.

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