Universal credit and employment settlement

[FabbyChix]

I can’t work am sick. I’m getting an amount monthly untaxed for an employment settlement do I have to declare this. If so then why it’s not traceable

how much are you getting and for how long?

I am not an expert and don't know the UC rules so can't answer your main Q but I know a little about ESAs. My understanding is that the legislation only allows the first £30,000 to be untaxed, and then only for specific reasons which wouldn't normally result in a monthly payment. The logic for this is that if an ex employee is given a lump sum in compensation for eg being injured by an accident at work then the settlement payment is effectively to be spread out over many years to come and it would be perverse to tax it all as income in a single year if the total sum is relatively modest.

It's better to declare it as it could well fall under the category of income to be disregarded? Could you ring and ask?

H3058 Payments made by an employer to a person in respect of

1. an absence due to sickness or disability (for example, employer’s sick pay)
2. tax where a deduction is not possible
3. a director’s earnings but the tax due has not been deducted
4. contributions to a non-approved personal pension arrangement (it is for

HMRC to grant approval to a pension scheme)

1. restrictive undertakings (for example, where an employee agrees not to work

for a competitor or agrees to confidentiality) fall to be treated as earnings1

I think that they will treat it as earnings, if you are being paid by the company. Do you get a wage slip?

Yes it was six months pay five settlement untaxed

I'm not an expert, but I think they will class that as income and you need to declare it.

do you have it in writing exactly why you have been given this settlement and why it is untaxed? I suspect you are obliged to declare it as income and pay tax on it (and have it taken into account for UC purposes) but your ex employers are putting it through outside the payroll system in order to avoid having to pay employer's national insurance contributions.

there are specific reasons for settlements that make them genuinely tax free but I wouldn't assume unless you have it in writing.