kd01
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Foreign Termination payment: application of the £30k exemption
For 23/24 I was resident in the UK and in another jurisdiction for tax purposes - effectively commuting between the two countries though my entire employment was in the overseas jurisdiction. My foreign employer applied a £30k tax exemption against the termination payment element of the total compensation payment and income tax was deducted at source for the whole compensation payment minus the £30k tax exemption by my employer. If I was only resident in the UK and a compensation payment was made by a UK employer the £30k tax exemption would apply. However, the online self assessment process does not allow me to utilise the relevant lump sum/compensation boxes on the additional information pages because it is not UK income. Although I can claim foreign tax credit relief, the SA process effectively forces me to pay income tax on the £30k that has been exempted in the overseas jurisdiction. This seems rather unfair but is it correct? There is seemingly no way for me to apply the £30k tax exemption against the foreign termination payment which had it occurred in the UK I would be able to do.