UK · 2026
UK Settlement Agreement Calculator
Estimate the gross value of a UK settlement package: statutory redundancy, PILON, unused holiday and any ex-gratia amount. The £30,000 tax-free allowance is applied to the statutory and ex-gratia portions only.
Settlement agreement calculator
Used for redundancy (capped at £700/wk), PILON, and holiday maths.
Anything the employer is offering on top of statutory redundancy. Sometimes called “enhanced redundancy” or a “goodwill payment”.
Estimated total package (gross)
£20,900
Tax-free portion: £12,500 · Taxable as earnings: £8,400
| Element | Gross | Tax treatment |
|---|---|---|
| Statutory redundancy | £7,500 | Tax-free up to £30,000 (combined) |
| PILON | £7,200 | Fully taxable as earnings |
| Unused holiday | £1,200 | Fully taxable as earnings |
| Ex-gratia | £5,000 | Tax-free up to remaining £30k allowance |
Estimates only. Real settlements include items this tool doesn’t cover (bonuses, share schemes, pension top-ups, legal fee contributions, references, agreed wording). For your specific situation, contact ACAS or an employment-law solicitor.
What this calculator estimates
A typical UK settlement agreement combines several distinct payments, each with its own tax treatment. This tool brings them together into a single estimated package figure and shows the tax-free portion versus the taxable portion. It uses the same formulas as the gov.uk redundancy calculator for statutory redundancy and the HMRC PENP rules for PILON.
The four parts of a typical package
Statutory redundancy pay is calculated from your age, years of service, and weekly pay (capped at £700 per week). The formula is set out in section 162 of the Employment Rights Act 1996. The result is tax-free up to a combined £30,000 allowance.
PILON is your normal pay for any unworked notice. Since the Finance Act 2018, all PILON is treated as Post-Employment Notice Pay (PENP) and is fully taxable as earnings under PAYE and National Insurance. It does not get any share of the £30,000 allowance.
Unused holiday pay covers any statutory and contractual leave you’ve accrued but not taken. It’s paid out at your normal daily rate and taxed as earnings the same as PILON.
Ex-gratia is anything the employer is offering on top of the statutory minimum. Common reasons include closing the case without a tribunal, smoothing a difficult exit, or matching internal precedent. The ex-gratia slice can use whatever’s left of the £30,000 allowance after statutory redundancy.
Worked example
Sarah is 45, with 10 years of service and £600 gross weekly pay. She’s being made redundant with a 12-week unworked notice, 10 days of unused holiday, and a £5,000 ex-gratia offer.
- Statutory redundancy: 5 years × 1.5 (band 41+) + 5 years × 1 (band 22-40) = 12.5 weeks × £600 = £7,500
- PILON: 12 × £600 = £7,200
- Holiday: 10 days × (£600 / 5) = £1,200
- Ex-gratia: £5,000
- Total gross: £20,900. Tax-free portion: £12,500 (statutory + ex-gratia, well under the £30k cap). Taxable portion: £8,400 (PILON + holiday).
What this calculator does not include
Real settlements usually contain extras the calculator can’t model from generic inputs: unvested share schemes or RSUs being accelerated or forfeited, deferred bonus forfeiture or buy-out, pension top-up contributions, contributions to your legal fees (commonly £350-£750 + VAT), outplacement service costs, agreed reference wording, dates for garden leave, and amended restrictive covenants.
Each of these has its own tax treatment. A solicitor will model the specific numbers in your offer. The calculator gives you a starting point for the conversation.
Related calculators and guides
- Redundancy pay calculator — statutory redundancy on its own.
- PILON calculator — gross payment in lieu of notice.
- Holiday entitlement calculator — accrued days at termination.
- Garden leave calculator — when garden leave is used instead of PILON.
- What is a settlement agreement?
- Do I need a solicitor for a settlement agreement?
- Can I negotiate a settlement agreement?
- Redundancy pay tax explained
Frequently asked questions
- What does this calculator include?
- Statutory redundancy pay (age and service banded), PILON for unworked notice, unused holiday paid out as cash, and any ex-gratia amount the employer is offering on top. It applies the £30,000 tax-free termination allowance to the statutory and ex-gratia portions but not to PILON or holiday (which are always fully taxable since 2018).
- What does the £30,000 tax-free allowance actually cover?
- It covers statutory redundancy and any ex-gratia termination payment, combined. It does NOT cover PILON, holiday pay, contractual bonuses, or accrued contractual pay — those are taxed as normal earnings under PAYE plus NI. If your statutory redundancy is £20k and your ex-gratia is £15k, the first £30k is tax-free and £5k of the ex-gratia is taxable as earnings.
- Is the calculator suitable for senior settlements?
- It gives a useful first estimate. Senior packages often include items the calculator doesn't model: share scheme vesting, deferred bonus, pension top-ups, restrictive covenant payments, legal fee contributions, agreed reference wording, gardening leave dates, and outplacement support. For anything above £50k or a senior role, take advice before signing.
- Why does the calculator show statutory redundancy as £0?
- Statutory redundancy requires at least 2 years of continuous service. If your years input is below 2, statutory redundancy is zero by law. Your employer can still offer an ex-gratia payment without statutory redundancy applying, and that ex-gratia can use the £30,000 tax-free allowance.
- Should I accept the first offer in a settlement?
- Often not. Initial offers are usually below what the employer is willing to pay. Common moves include negotiating a higher ex-gratia, agreeing the reference wording in writing, getting confirmation of pension and benefits treatment, asking for a contribution to legal fees (commonly £350-£750 + VAT), and clarifying restrictive covenants. Take advice from a solicitor before responding.
Employment law resources
Estimates only, not legal or tax advice. Statutory redundancy must be paid by your employer regardless of any settlement. For your specific situation, contact ACAS or an employment-law solicitor.