How much tax would I pay on this settlement?

EdithH

Hi all

I would be grateful if someone could help me with the following

I have been offered 8000 as a settlement out of court to prevent me from taking an ex employer to a tribunal.
They have offered it as a lump sum, not pay. It is the equivalent of 4 months salary but its not being given as salary-just a settlement figure.

Will I be paying tax on this? How does it work? Does it count as PAYE? I'm confused as one site calculated the tax as almost £2500 and the other only stated a few hundred?

HELP!

Thanks in advance, E

ceeforcat

Need more information - what is the nature of the award? Is it compensation? Is it for salary owed? Why were you entiltled to it e.g. employment terminated without notice.

chrismac1

If it is damages then it is not taxable. If it was a contractual entitlement it is taxable. This is a big simplification, with more details we can say more.