Ok here comes redundancy - what can be tax free?

[redundantdh]

We're coming to terms with redundancy but naturally we want to get the most ££ that we can.

We'll get £700 as redundancy pay
Three months pay in lieu of notice
18 days holiday pay
Compensation for health and pension cover

Is there anything else "normal(ish)" we shoiuld get and what is allowed to be tax free. His tax code id for over £40K but is he earns nothing more this tax year he'll have earnt c£20K.

Also is a "Compromise Agreement" (as requested by the employer) pretty normal these days?

Thanks in advance

[trixymalixy]

Redundancy pay is tax free up to £30k.

PILON and the rest will probably be taxed as income unless there is no PILON clause in his contract in which case it counts as a compromise agreement and the first £30k will be tax free.

[redundantdh]

I think his contact says 3 months notice or PILON - so should we take it that is enough to trigger the tax?

[flowerybeanbag]

If his contract has PILON then his notice pay will be taxed as normal, as will holiday he has accrued and not taken.

His £700 redundancy pay will not be taxed.

If they are paying him a sum as 'compensation' for loss of other benefits, that probably won't be taxed iirc.

Compromise agreement is nothing to worry about, as long as he is satisfied with the circumstances, that it is a genuine and fair redundancy. His employer must pay for him to have it checked by an independent legal adviser, usually a solicitor.

[southernsoftie]

Anything non contractual can be paid tax free as long as it is compensation for loss of office and not for anything else (eg not a payment for agreeing to a restrictive covenant to continue running.

What flowery says about getting the agreement signed off. Not sure there is a legal obligation for the employer to pay but most will as it gives them protection against you claiming the agreement was unfair or you were coerced into signing it.

[flowerybeanbag]

No there isn't a specific legal obligation as such, but a compromise agreement won't stand up if the employee hasn't had the opportunity to take proper advice, so an employer needs to pay for this for it to be worth the paper it's written on really.