compensation and tax?

[chilly]

well we won our court battle for unfair dismissal and are due back in court on the 22nd of january  does anybody know if we have to pay tax on our compensation? we have no idea how much we will get but it could be as much as a years wage we think (hope) as far as losses go i am about £30 a week down on this gardening leave but on the other hand i am not using £20 a week on fuel so can't complain. will have to find a job in january but i will worry about that later. 

[Pat]

Redundancy is tax free for the first £30k.

[chilly]

if we got more than 30k would we pay tax on all of it or just on the amount over 30k?

[Pat]

Just the part over 30K, it's counted as earned income, so subject to tax & NI.

[chilly]

ta    its doubtful we will get over 30 but the solicitor said not to rule anything out

[alan sherman]

It is not a redundancy payout - it is compensation.  I believe it counts as income so you should probably do a self assessment for this tax year.  Best bet is to call HMRC to ask them, or an accountant.

[fazed600]

Hopefully not - compensation is damages for loss, not earned income. What the company might try to do is compensate you for the earnings you were due to receive post-tax and not pre-tax, as this is effectively what you have "lost".