Estimated Take-Home
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Settlement Agreement Tax Estimator
Settlement agreements contain several different types of payment — and each is taxed differently. Enter each component below to see exactly what's tax-free, what you'll owe tax on, and what you're likely to take home. The £30,000 threshold tracker updates as you type.
📅 2026–27 tax rates
£30,000 termination exemption
Income Tax: 20% / 40% / 45%
See all statutory rates →
£
Required — used to calculate your marginal tax rate on the taxable elements of your settlement
Settlement components
Enter each payment in your settlement. Leave blank or enter zero for any that don't apply. The £30,000 threshold tracker updates as you type the first three fields.
£
Always tax-free — counts toward £30,000 threshold first
£
Above statutory minimum — counts toward £30,000 threshold
£
Genuine compensation for loss of employment — counts toward £30,000
£
Always fully taxable — sits outside the £30,000 exemption entirely
£
Always fully taxable as earnings
Paid directly to your solicitor — separately tax-free with no limit
This is an estimate based on 2026–27 tax rates. Your actual take-home depends on your tax code, other income, and how your employer processes the payment. Always verify with your solicitor or a tax adviser before signing. See our terms.
PAIRED GUIDE
Settlement Agreements Explained – What to Know Before You Sign
What a settlement agreement is, which payments are tax-free, whether you need a solicitor, and what to watch out for before you sign.
Read the Guide →How the Tax Treatment Works
Each component of a settlement agreement is taxed under different rules. Getting this wrong — or accepting an employer's figures without checking — is a common and costly mistake.
| Payment type | Tax treatment | Counts toward £30,000? |
|---|---|---|
| Statutory redundancy pay | Tax-free within £30,000 limit | Yes — counts first |
| Enhanced redundancy pay | Tax-free within remaining £30,000 headroom | Yes |
| Ex-gratia / compensation | Tax-free within remaining £30,000 headroom | Yes |
| Pay in lieu of notice (PILON) | Always fully taxable as earnings | No — sits outside the exemption entirely |
| Accrued holiday pay | Always fully taxable as earnings | No |
| Legal fees contribution | Tax-free — paid directly to your solicitor | No — separately exempt, no limit |
Frequently Asked Questions
How much of my settlement is tax-free?
Up to £30,000 of qualifying termination payments — statutory redundancy, enhanced redundancy, and genuine ex-gratia compensation — is tax-free. PILON and holiday pay are always taxable regardless of the total. Legal fees paid to your solicitor are separately exempt with no cap.
Why is PILON always taxable?
Pay in lieu of notice has been fully taxable since April 2018 under the Finance Act 2017. Before this, whether PILON was taxable depended on your contract wording. Now it is always treated as earnings — Income Tax and National Insurance are deducted at your normal marginal rate regardless of what your contract says.
Does my employer pay National Insurance on my settlement?
Yes — your employer pays 13.8% employer NIC on any termination payment above the £30,000 threshold. This is their cost and is not deducted from your payment, but it increases the total cost of your settlement to them. Worth knowing in negotiations.
Do I need a solicitor to sign?
Yes — a settlement agreement is only legally binding if you have received independent legal advice from a qualified solicitor or adviser. Your employer must contribute to your legal costs. That contribution, paid directly to your solicitor, is tax-free with no cap.
What is the tapered personal allowance and does it affect me?
If your total income — salary plus taxable settlement elements — exceeds £100,000, your personal allowance reduces by £1 for every £2 above £100,000. This creates an effective 60% tax rate between £100,000 and £125,140. This tool includes the taper in its calculation, so if you are in this band you will see a higher effective rate than the headline 40% higher rate.