Settlement Agreement info - how does it affect my salary tax rate?

[Ysgraithe]

Hi there!

I have tried looking all over the web about this issue but couldn't find a satisfactory asnwer.

I am about to agree to an ex gratia settlement of 100K net with my previous employer. I understand that they will pay the tax on this so that I will receive a net payment of 100k.

My question is this: I have a full time job now (the legal proceedings went on quite a while, enough to have found another job), does this mean that all my income for this financial year will be taxed at a flat 40% because I have received this 100k settlement?

Or will I be taxed the normal rate as before?

If I will get taxed the full amount, is it not better to modify the settlement agreement so that the 100k is deposited as close as possible to the end of the financial year, as to minimise the amount of income tax on my salary?


Thanks in advance.

[ULA]

In accordance with Income Tax Act only the first £30k of any ex gratia settlement agreement is tax free above that you will pay tax but not national insurance on the remaining amount.

[Ysgraithe]

In accordance with Income Tax Act only the first £30k of any ex gratia settlement agreement is tax free above that you will pay tax but not national insurance on the remaining amount.

Thank you for replying, I am aware of the first 30k being tax free on the settlement itself (the settlement is in fact 100k net, the previous employer will pay the gross amount so I receive 100k clean) - I was referring to my current employment.

Does this means my current job salary will be taxed 45% for the rest of the financial year, is that correct?

As the 100k settlement will be classed as income and together with my salary, it will put me well above the £125,140 threshold for most of the year. I'd be massively taxed on my current salary.