The question of how payments of holiday pay should be taxed is a long-standing area of uncertainty for employers and payroll software providers.
The intention is:
|When holiday pay is paid||How holiday pay should be taxed|
|Paid as a lump sum||
Should be taxed as an extra pay
|Included in regular salary or wages, or paid in substitution for regular salary or wages when leave is taken||Should be taxed as salary or wages|
This intention could be clarified either in legislation or in an Inland Revenue publication.