Independent UK Employment Settlement & Compromise Calculator
From your statutory tax-free allowance to your net take-home figure. Free, no email required.
Under UK tax law, genuine compensation for loss of employment qualifies for the £30,000 exemption. In contrast, notice pay (PILON) is treated as earnings and taxed in full under PENP rules. The calculator splits them automatically.
Under Section 403 of ITEPA 2003, the first £30,000 of qualifying termination compensation is completely free of income tax and employee National Insurance. Anything above £30,000 is taxed at your marginal rate.
If your severance package pushes you into the 40% or 45% tax bracket, you can often negotiate to pay part of the taxable excess into your pension. This saves thousands in tax while keeping the full value of your offer.
Most employees sign the first number they receive without questioning it. That number is rarely the final one.
Enter your salary, length of service, and your offer to see your estimated net take-home after tax. PILON and the £30,000 exemption are calculated separately.
What is PILON?
PILON stands for Payment in Lieu of Notice. It is the lump sum your employer pays instead of letting you work out your notice period. Unlike redundancy pay, PILON is always taxed as normal income.
Payment in lieu of notice is treated as earnings under ITEPA 2003 s.402D. It is subject to income tax and National Insurance at your normal rate, regardless of what your agreement calls it.
Statutory redundancy pay and other termination payments up to £30,000 are exempt from income tax under ITEPA 2003 s.403. The portion above £30,000 is taxable at your marginal rate.
Most calculators show a gross figure. This one calculates PILON and redundancy pay separately, applies the correct tax treatment to each, and shows your estimated net take-home figure.
Most settlement calculators online are built by law firms trying to capture your case. Ours is independent. Solicitors on our panel pay a small introduction fee per qualified lead. We have no single firm to push you towards, and we curate the panel for quality, not volume.
What employees want to know before clicking “calculate.”
A typical UK settlement agreement pays between one and three months of gross salary, plus notice pay and accrued holiday. Your total package should also include statutory redundancy pay, capped at £751 per week, with the first £30,000 paid tax-free.
Under Section 403 of the Income Tax (Earnings and Pensions) Act 2003, the first £30,000 of compensation for loss of employment is tax-free. This applies to statutory redundancy pay, enhanced redundancy, and ex-gratia compensation. Notice pay, accrued holiday pay, and contractual bonuses do not qualify for this exemption.
Under Section 402D of ITEPA 2003 (the Post-Employment Notice Pay or PENP rules), all payments in lieu of notice are taxed as standard employment earnings. This means PILON is subject to income tax and employee Class 1 National Insurance, regardless of whether your contract contains a PILON clause.
Employees do not pay National Insurance on genuine termination compensation, even on amounts exceeding £30,000. While income tax applies to any compensation above £30,000 at your marginal rate, employee National Insurance is zero. Employers, however, must pay Class 1A employer National Insurance (13.8%) on compensation over £30,000.
Yes. Pension sacrifice (also known as a pension contribution or employer pension top-up) is one of the most effective ways to protect your settlement from higher-rate tax. You can request that your employer pays a portion of the taxable settlement directly into your registered pension scheme before tax is deducted.
Almost every settlement agreement contains a tax indemnity. This clause states that if HMRC determines that more tax is owed on your settlement payment than was deducted at source, you are personally liable to repay that tax to your employer. A specialist employment solicitor will review this clause to ensure it is drafted fairly and does not expose you to unexpected penalties.
Under Section 203 of the Employment Rights Act 1996, you must receive independent legal advice for the agreement to be binding. Your employer covers this cost, typically contributing between £350 and £750 plus VAT directly to your solicitor. The advice is free to you.
Updated every April. The calculator always uses the current rates.
| Figure | 2025/26 | 2026/27 |
|---|---|---|
| Statutory tax-free termination threshold (s.403 ITEPA) | £30,000 | £30,000 |
| Notice pay (PILON) tax status | 100% Taxable (as earnings) | 100% Taxable (as earnings) |
| Employer NIC on termination payments over £30k | 13.8% (Class 1A) | 13.8% (Class 1A) |
| Employee NIC on termination payments over £30k | 0% (Exempt) | 0% (Exempt) |
| Statutory weekly pay cap (GB) | £719 | £751 |
| Pension sacrifice availability on excess termination | Permitted | Permitted |
Sources: ERA 1996 s.227 (GB cap), ERO(NI) 1996 (NI cap), ITEPA 2003 s.403 (£30,000 threshold). Figures effective 6 April 2026.
Figures reflect the Employment Rights (Increase of Limits) Order 2026 (SI 2026/310) and Employment Rights (Increase of Limits) Order (Northern Ireland) 2026 (SR 2026/57), in force from 6 April 2026. Last reviewed: May 2026.
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