Employer taxed part of my redundancy settlement despite agreement saying it should fall within the £30k exemption
I was made redundant from a large company and my employment ended in early September.
As part of my termination, I signed a settlement agreement for around £22,200 in compensation for loss of employment.
The agreement says, in substance, that the company believes the relevant termination payment should fall within the usual £30,000 tax and National Insurance exemption, unless they are legally required to make deductions.
When I received my final payslip, they had split the compensation into two parts.
Around £18,800 was treated as ex gratia and apparently tax free.
Another £3,400 was separated out and treated as taxable.
Those two amounts together make up the full settlement payment.
I raised this with HR/payroll and asked why the £3,400 was taxed when it forms part of the same settlement payment. I have also asked them to explain what tax rule required them to treat that part differently. So far I have been ignored and sent round in circles.
I am not disputing tax that is genuinely due. The issue is that the payroll treatment does not seem to match the way the settlement payment is described in the agreement, and the company has still not explained why.
Not sure what else to do.