Settlement agreement tax calculator

Reviewed: September 2026

Settlement agreements often combine compensation, notice pay, holiday pay and other payments. Not every amount labelled 'settlement' is automatically tax-free. Our calculator classifies each component correctly.

Settlement payments and tax

Genuine compensation for loss of employment may qualify for the £30,000 termination payment exemption. However, PILON, holiday pay, unpaid wages and bonuses remain taxable as earnings regardless of how they appear on your settlement agreement.

Source:HMRC EIM13505

Limitations

We do not calculate PENP automatically. If your employer has applied Post-Employment Notice Pay rules, enter the taxable PILON amount shown in your paperwork.