settled out of court

[milesy]

ive recently settled out of court with the royal mail after putting in an unfair dismissal claim to a tribunal. we settled on a figure and acontract was drawn up. ive recieved a payslip today with the amount on however i have been taxed and paid ni on this amount which has made a big difference. the contract i signed never said anything about paying tax/ni or that the amount was gross. should i have paid tax on this settlememt? cheers in advance.

[stokes11eg]

ive recently settled out of court with the royal mail after putting in an unfair dismissal claim to a tribunal. we settled on a figure and acontract was drawn up. ive recieved a payslip today with the amount on however i have been taxed and paid ni on this amount which has made a big difference. the contract i signed never said anything about paying tax/ni or that the amount was gross. should i have paid tax on this settlememt? cheers in advance.

Hi, Milesy, this is a very complicated area, and one that should have been covered at the outset. So many factors come in to account. If you only claimed for you net losses,
(loss of wages, pension etc) lost by reason of emplyoyers default, and provided it is below a certain amount (will not mention the amount here in case you do not want it public!) then you pay no tax. Above that amount you could be whacked for 40% and possibly some N.I. too. Prior to tribunal you should have been advised that you should have claimed up to the amount that allows for this 40 odd percent reduction, (through claiming for hurt feelings , aggravated damages etc--) when that amount is then deducted, you should be left with amount you originally claimed for! Told you it's a very complicated issue, but hopes this makes sense to you. Good luck in the future!