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Tax on settlement agreement

(4 Posts)
DontTouchTheMoustache Mon 30-Jan-17 12:08:25

Hi everyone, I'm not sure if this is the best place to post this so I've popped it on a few boards. I was on mat leave this year but accepted a settlement agreement in September. The payment was tax free however I'm looking for work and will probably be starting in the next few weeks so still a few months of this tax year. What in wondering is:
a) does this settlement agreement form part of my personal allowance? I.e. when I start working and tax is worked out for the year would this payment be included in that working out by hmrc? And
b) is that settlement agreement considered by tax credits when working out what you are entitled to (because obviously the amount I expected to relieve for the year was less when I applied for tax credits as I did not know about the settlement agreement so if the included in will be a few thousand over what I estimated and will probably have to pay some back so I'd rather this wasn't a nasty surprise).
Thanks in advance if anyone can help or if you have a suggestion on where I should post where someone might know.

PiggyPepper Mon 05-Feb-18 23:32:35

Your settlement is completely separate to your earnings so doesn't come off your personal allowance.

HMRC rules allow £30,000 per year in "severance" payments completely tax free.

Anything over that is taxed at your usual rate.

PiggyPepper Mon 05-Feb-18 23:33:42

I don't know how it affects tax credits, I would guess if they are means tested it will be taken into account under capital?

PiggyPepper Mon 05-Feb-18 23:34:20

Sorry read the date wrong and realised this is a year old!!! Doh.

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