compensation and tax?

[chilly]

well we won our court battle for unfair dismissal and are due back in court on the 22nd of january  :woot 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  :thumbup  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".