Tax on severance pay

[lechatnoir]

I am entering into a compromise agreement and have proposed sum of £30k in return for walking away from my job. Is this taxable? If not, can I request a higher figure to make upfor the tax paid so I end up walking away with £30k? Chances are this will be negotiated and because I too want to leave I'll end up taking far less than this but you never know...
Many thanks
LCN

Its complicated - there is a £30,000 tax exemption but all depends on if contractual or non contractual - look at this website which has info as of August 2011 but it hasnt changed since. Hope it helps.

www.out-law.com/en/topics/tax/employment-tax/taxation-of-termination-payments/

You need legal advice you cannot sign a compromise agreement without it.

Thank you both and will definitey take legal advice before I sign on the dotted line.

Just to add your employer in a CA would normally contribute to the cost of your legal advice!

Afaik £30k is the cut off, any more you pay tax on but as the others have said get it checked out legally first

If you are getting your notice period paid in lieu of notice being given, that is taxed and NI'd as usual.

If you are being given an ex-gratia payment then that is tax free (subject to a cap).

Any bonus payments owing are taxed as usual.

However if you don't find new work this tax year you are probably due a tax rebate once you get your P45.

If any of this involves you having a baby, or not returning after maternity leave PM me as I am an EXPERT in this area.

And once you have your P45 PM me and I will help you get your tax rebate if you are due one.

PM me anyway if you want to ask anything about the compag. Am an accountant not a lawyer (DH is) but I am v keen to help any woman being screwed over by her employer. I have helped lots of people before and I don't charge (yet, until I have built my reputation up!)

PILON is only taxable if the employer is entitled to pay in lieu. If there is no contractual provision for PILON then it would technically be compensation and would not be taxable.

OP your employer will need to fund you getting this checked by a solicitor if it is going to stand up, and the solicitor will be able to advise you on what if any potential case you have, what a fair sum would be and on the terms of the agreement itself.

Have your employer made an offer that you are countering? If you're at the stage of actually negotiating figures I would strongly advise you don't do that until you have legal advice.