Interest and tax 




If the sum awarded remains unpaid 42 days after the tribunal decision, interest is payable on amounts outstanding.




A compensation payment for unfair dismissal under a compromise agreement is tax free up to £30,000, even if the employee is reinstated, as long as it is genuine compensation for loss of the job, rather than earnings or a payment for services (HM Inspector of Taxes v Clayton [2005] IRLR 108). Any amount over £30,000 is subject to income tax (but not currently employer National Insurance contributions — NICs). 




From April 2019, Employers‘ NICs are to be charged on all termination payments over £30,000. 



The rules on the taxation of notice payments changed from April 2018. See page 317.