Your employer is responsible for deducting the tax according to the oT tax number, calculated on the basis of the absence of personal allowances and the distribution of tax bands in twelfths adapted to the tax months. For the employer, this could mean deductions at rates between 20% and 45%, depending on the amount above the £30,000 payment threshold. If the dismissal is real and the selection process is fair, then technically you are only entitled to the legal minimum – see our article on redundancy – and not to any type of increased payment or “ex gratia”. A settlement agreement allows for a net interruption of the employment relationship in which the worker agrees to waive his or her right to assert claims against an agreed amount or compensation. Typically, employers can pay the first £30,000 in compensation for the arrangement agreement tax-free, but this is not the case for all payments. The tax on the transaction agreement differs depending on a number of considerations. . . .