Settlement Agreement Calculator
Settlement Agreement Breakdown
Notice Pay-
Statutory Redundancy Pay-
Holiday Pay-
Ex-Gratia / Enhancement-
Total Gross Package-
Tax-Free Amount (up to £30,000)-
Estimated Tax on Remainder-
Estimated Net Payment-
Settlement Agreement Tax Treatment
| Component | Tax Treatment | NI Treatment |
|---|---|---|
| Notice pay (PILON) | Taxable | NI payable |
| Statutory redundancy | Tax-free* | NI-free |
| Ex-gratia (first £30,000) | Tax-free | NI-free |
| Ex-gratia (over £30,000) | Taxable | Class 1A NI from April 2025 |
| Holiday pay | Taxable | NI payable |
| Bonus owed | Taxable | NI payable |
*Statutory redundancy counts towards the £30,000 tax-free exemption. Employer Class 1A NI applies to termination payments over £30,000 from April 2020.
Key Settlement Facts
Tax-Free Limit
£30,000
Weekly Pay Cap
£700
Max Statutory Redundancy
£21,000
Legal Advice Fee
Employer pays
Min Legal Advice
£350-£500+VAT
Cooling Off
10 calendar days
How to Use This Calculator
1
Enter your salary and service
Your annual salary and years of service determine notice pay and redundancy entitlement.
2
Add your age
Age affects the statutory redundancy multiplier (0.5, 1, or 1.5 weeks per year).
3
Enter notice period and holiday
Include contractual notice and any accrued but untaken holiday.
4
Add any ex-gratia payment
This is the enhancement above statutory entitlements offered by your employer.
5
Review the tax breakdown
See what is tax-free (up to 30,000 pounds) and what will be taxed.
Frequently Asked Questions
What is a settlement agreement?
A settlement agreement (formerly compromise agreement) is a legally binding contract between employer and employee. The employee agrees to waive their right to bring claims in return for a compensation package. The agreement must be in writing and the employee must receive independent legal advice from a solicitor or certified adviser. The employer typically pays the legal advice fee.
Is the first 30,000 pounds really tax-free?
Yes, genuine termination payments up to 30,000 pounds are free from income tax and employee National Insurance. However, payments that would have been made regardless of termination (notice pay, holiday pay, bonus) are always taxable. Only genuine compensation for loss of employment qualifies for the exemption. From April 2020, employer Class 1A NI applies to amounts over 30,000.
How much should I expect in a settlement?
A common rule of thumb is 1-3 months gross salary as an ex-gratia payment for a standard no-fault departure, plus notice pay and statutory redundancy. For cases involving potential unfair dismissal or discrimination claims, the settlement may be higher to reflect the litigation risk. Strong discrimination claims can justify 6-12+ months salary.
Do I need a solicitor for a settlement agreement?
Yes, by law. A settlement agreement is only valid if you receive advice from a relevant independent adviser — typically a solicitor, but also a certified trade union adviser or advice centre worker. The employer must contribute to your legal advice costs (typically 350-500 pounds plus VAT). The solicitor must sign a certificate confirming they provided advice.
How long do I have to consider a settlement?
ACAS Code of Practice recommends a minimum of 10 calendar days to consider the offer, although this is not a strict legal requirement. Your employer should give you reasonable time. If you feel pressured, your solicitor can request an extension. Unreasonable time pressure can strengthen any subsequent tribunal claim.
Official Sources & References
Data verified against official UK government sources. Last checked April 2026.