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Settlement amount deductions, tax, NI, etc

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  • Settlement amount deductions, tax, NI, etc

    Hi,

    I have been offered a settlement agreement for my ET in a COT3 document from the Respondent. They specify that any deductions are my responsibility. As such I'd like an idea of what I should expect deduction wise in a COT3 agreement and if the case goes to hearing, what deductions are there on awards.

    So far my understanding is that for amount under £30k there are no deductions.

    I just want to make sure that any amount I agree to does not get slashed down to half or something.

    Many thanks for your time and help.
    Tags: None

  • #2
    Any sums to which you contractually entitled are deductible for tax and NI in the normal way eg: notice pay, holiday pay.

    The first £30,000 of any award that arises purely as a result of the termination is tax free, while amounts over and above that are liable to tax.
    If you would like a one-to-one expert consultation with me on your employment issue than I can be contacted by emailing admin@legalbeaglesgroup.com

    I do my best to provide good practical advice, however I do so without liability.
    If you have any doubts then do please seek professional legal advice.


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    • #3
      Originally posted by ULA View Post
      Any sums to which you contractually entitled are deductible for tax and NI in the normal way eg: notice pay, holiday pay.

      The first £30,000 of any award that arises purely as a result of the termination is tax free, while amounts over and above that are liable to tax.
      Thank you for your reply and the explanation ULA . The settlement agreement does include termination of my contract and settlement of the case in the tribunal. Let's say the amount is £50k and then there is my pay and notice pay on top. Would the £20k be taxed (£50 settlement minus £30k not taxed)?

      Comment


      • #4
        Anything over and above £30k is liable for deductions.
        If you would like a one-to-one expert consultation with me on your employment issue than I can be contacted by emailing admin@legalbeaglesgroup.com

        I do my best to provide good practical advice, however I do so without liability.
        If you have any doubts then do please seek professional legal advice.


        You canít always stop the waves but you can learn to surf.

        You are braver than you believe, smarter than you think and stronger than you seem.



        If we have helped you we'd appreciate it if you can leave a review on our Trust Pilot page

        Comment


        • #5
          Originally posted by ULA View Post
          Anything over and above £30k is liable for tax and NI deductions.
          Thank you very much for this ULA, I am going to ask that they either take care of any and all deductions or give me a breakdown of all deductions along with their offer, so that I know how much is in my pocket.

          So far when they've made their offers, they have only said that it may be subject to deductions by the HMRC.

          Comment


          • #6
            You can ask them but they'll probably tell you that you will have to get your own professional advice on the matter.
            All opinions expressed are based on my personal experience. I am not a lawyer and do not hold any legal qualifications.

            Comment


            • #7
              A requirement of a settlement agreement (SA) is that Wolfreaper takes independent legal advice from an employment adviser. The company is required to make a contribution towards the legal costs. These days, with a relatively straight forward agreement, it is around £500 for the contirbution.
              If you would like a one-to-one expert consultation with me on your employment issue than I can be contacted by emailing admin@legalbeaglesgroup.com

              I do my best to provide good practical advice, however I do so without liability.
              If you have any doubts then do please seek professional legal advice.


              You canít always stop the waves but you can learn to surf.

              You are braver than you believe, smarter than you think and stronger than you seem.



              If we have helped you we'd appreciate it if you can leave a review on our Trust Pilot page

              Comment


              • #8
                Originally posted by ULA View Post
                A requirement of a settlement agreement (SA) is that Wolfreaper takes independent legal advice from an employment adviser. The company is required to make a contribution towards the legal costs. These days, with a relatively straight forward agreement, it is around £500 for the contirbution.
                Thank you for this information. The settlement is via ACAS COT3, I saw on another post in the forum that the employer is not required to make a contribution towards the legal costs here. Did I understand correctly?
                Do I need to seek legal advice on this for the deductions? Will it just be from a lawyer that deals with employment claims?

                Comment


                • #9
                  If the settlement is via an ACAS COT3 then no your employer is not obliged to contribute towards any costs for taking independent legal advice.

                  I will set out again that any contractual payment e.g. pay in lieu of notice, accrued but untaken holiday pay will be subject to tax and NI deductions - there is nothing you can do about this. If you are receiving a sum as compensation for the termination of your employment then up to £30k is tax free, over and above that then there deductions made again under HMRC tax rules you cannot avoid paying this.

                  If you want to get clarity then we would always recommend taking advice and it would be an employment lawyer or tax adviser who would be best place to provide this.
                  If you would like a one-to-one expert consultation with me on your employment issue than I can be contacted by emailing admin@legalbeaglesgroup.com

                  I do my best to provide good practical advice, however I do so without liability.
                  If you have any doubts then do please seek professional legal advice.


                  You canít always stop the waves but you can learn to surf.

                  You are braver than you believe, smarter than you think and stronger than you seem.



                  If we have helped you we'd appreciate it if you can leave a review on our Trust Pilot page

                  Comment

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