Kate Brooks
Partner, Solicitor & Head of Employment/HR Services
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Date Published:05 May 2017 Last Updated:10 Apr 2021

How much can I get tax free under a settlement agreement?

Employment Law Advice

A settlement agreement is an agreement between an employer and an employee. Under a settlement agreement the employee agrees not to bring any employment claims and in return the employer often makes a payment to the employee.

The first £30,000 of a termination payment may usually be paid tax free under a settlement agreement.

Any wage payments should have tax deducted at source as normal. Wages include salary, bonus, commission and holiday payments.

Your employer should usually pay for you to have the settlement agreement explained and this contribution towards legal fees should be anything from £250 plus Vat.

ACAS have published a comprehensive guide in relation to settlement agreements with further information.

If you have been given a settlement agreement or are considering negotiating with your employer please contact me on 01202 057754 or kate.brooks@ellisjones.co.uk.