Free legal-adjacent tool · UK 2026/27
UK Settlement Agreement Calculator
What's a fair UK settlement worth? Get Low / Realistic / Stretch bands across statutory redundancy, PILON, holiday, ex-gratia, and the £30k tax-free split — using the post-2018 PENP rules. No email wall, no solicitor referral, no signup.
Free No email wall PENP-compliant 2026/27 rates ITEPA s.402D
How the calculator works
UK settlement agreements stack 4-6 components, each taxed differently. The calculator models all of them using public statutory rules and ranges from real UK settlement data:
- Statutory redundancy — the legal floor under the Employment Rights Act 1996. Capped at £700/week × age multiplier × years (max 20). Counts toward the £30k tax-free portion.
- Payment In Lieu Of Notice (PILON) — gross salary × notice weeks. Fully taxable under ITEPA s.402D PENP since April 2018. Cannot be sheltered in the £30k allowance.
- Holiday buyout — daily rate × accrued days. Taxable as wages.
- Ex-gratia compensation — the negotiated settlement uplift. First £30,000 (combined with statutory redundancy) is income-tax + NI free.
- Discrimination / injury-to-feelings uplift — Vento bands 2025: Lower £1,200-£11,200, Middle £11,200-£33,700, Upper £33,700-£56,200. Only applies if you have a credible claim.
Why three bands
UK employers typically open with a low first offer expecting a counter. The Realistic band is what most candidates achieve with a measured negotiation citing tenure + Tribunal-fee leverage. The Stretch band is the upper end where there's a genuine claim or strong negotiating position. Anchoring at Stretch in the first counter pulls the final outcome toward Realistic — anchoring at Low cements you below it.
Common questions
- What is a UK settlement agreement?
- A settlement agreement (formerly a 'compromise agreement') is a legally binding contract between you and your employer that ends your employment in exchange for a financial sum and waivers of your right to bring most employment tribunal claims. It must be in writing, you must have independent legal advice (your employer typically pays £350-£750 toward a solicitor), and the agreement is only valid once you've signed it after that advice. Common triggers: redundancy, performance dispute, mutual exit, settlement of a discrimination/whistleblowing claim.
- How is settlement calculated in the UK?
- There's no single legal formula. Most UK settlements stack 4-6 components: (1) statutory redundancy if eligible, (2) Payment In Lieu Of Notice (PILON) for the contractual notice period, (3) holiday accrual buyout, (4) tax-free ex-gratia up to £30,000, (5) any unpaid bonus/commission, and (6) sometimes injury-to-feelings if there's a discrimination element. The first £30k of the ex-gratia portion is tax-free; PILON is fully taxable under the post-2018 PENP rules (ITEPA s.402D); holiday buyout is taxable as wages. The tool models all six.
- What is a fair UK settlement amount?
- Rough ranges from real cases: 1-2 years tenure = 1-3 months gross salary; 3-5 years = 3-6 months; 6-10 years = 6-12 months; 10+ years senior = 12-18 months. These are TOTAL packages including statutory redundancy, PILON, holiday, ex-gratia. Negotiating leverage comes from tenure, your contractual notice (longer = more PILON), any discrimination/whistleblowing claim, and the cost to your employer of an Employment Tribunal (£15,000-£50,000+ in legal fees alone). The calculator returns Low / Realistic / Stretch bands so you know where to anchor.
- How does PILON tax work in 2026/27?
- Since April 2018 (ITEPA s.402D), all PILON is taxable as earnings via the Post-Employment Notice Pay (PENP) calculation. The PENP formula: ((basic pay × unworked notice days) ÷ pay-period days). That figure is fully subject to income tax + employee NI + employer NI. You cannot push PILON into the £30k tax-free ex-gratia portion. Many employers got this wrong between 2018-2022 — if you settled in that window, your settlement may have been mis-taxed; speak to a tax adviser about reclaiming.
- Is the £30,000 settlement portion really tax-free?
- Yes — but only the 'ex-gratia' compensation portion (also called 'compensation for loss of employment'). The first £30,000 of that portion is free from income tax AND National Insurance. Anything above £30,000 is taxed as employment income via PAYE. Statutory redundancy COUNTS toward the £30k cap (so a £15,000 statutory redundancy + £20,000 ex-gratia = £30k tax-free + £5k taxable). PILON, holiday buyout, and unpaid wages do NOT use the £30k allowance — they're separately taxable.
- Should I accept the first settlement offer?
- Almost never. Initial offers are typically the lowest amount the employer thinks you'll accept — it's a starting position, not a fair number. UK settlement negotiation is heavily anchored on the first counter: a measured counter at 1.5-2x the offer, citing the Tribunal-fee risk and any specific claim points (discrimination, whistleblowing, breach of contract), almost always yields 30-60% improvement. Get the agreement in writing first, run it through this calculator and a solicitor, THEN counter. Your employer pays for the solicitor's review (£350-£750 typical) — use that.
- Do I need a solicitor for a UK settlement agreement?
- Yes — by law. A settlement agreement is only legally binding if you've taken independent legal advice from a qualified UK solicitor. Your employer typically contributes £350-£750 toward those fees as part of the agreement. The solicitor's job is to (a) explain what claims you're waiving, (b) check the maths and tax position, (c) flag missing components (e.g. forgotten holiday), (d) negotiate uplifts where there's leverage. Skipping this step makes the agreement non-binding — but you'd lose the negotiating window.
- What if I have a discrimination or whistleblowing claim?
- Settlement values jump materially. UK Employment Tribunal awards for discrimination uncapped (largest 2025 awards exceeded £2m). Even a moderate-strength discrimination claim adds £5k-£25k to the typical settlement (the 'injury to feelings' Vento band: Lower £1,200-£11,200; Middle £11,200-£33,700; Upper £33,700-£56,200 — 2025 update). Whistleblowing claims (PIDA) are also uncapped. If your situation has either element, do not sign without specialist solicitor advice — the calculator's output will be a floor, not a ceiling.