What Is Taxable In A Settlement Agreement

Typically, settlement agreements are used when the employment relationship ends, and so the rule of thumb is that the first £30,000 can be paid tax-free. The tax implications of settlement payments are discussed in this article in two main parts: the first concerns payments that can be made tax-free and the second describes taxable payments. In the third and final part, we explain how an „ex gratia” payment of more than £30,000 is imposed in a settlement agreement and illustrate how the tax is calculated.