Will you be taxed on the ex gratia payments in your Settlement Agreement?
Ex gratia payments are the non- contractual payments paid by your employer as compensation for loss of office. As a rule, the first £30,000 of the compensation will be tax free. If a Settlement Agreement offers compensation which exceeds £30,000, the sum over and above £30,000 will be taxable. This sum alone will be taxed according to your usual income tax band.