Confusion about UK tax codes

I was due to start a new job in April, but the contract was withdrawn at the last minute. As a consolation, I will be paid 1 months' salary, less tax and NI. The tax and NI taken off will only be 1 months' worth, not a full years' worth (if they took off a whole years' worth, I would owe them money instead!).

Given that employment never took place this sounds more like compensation to avoid them being sued.  I do not believe this pay falls within any of the heads of tax in the UK, although of course it would be US taxable.  You may want to check the contract and compromise agreement you have reached on this issue.

Given that employment never took place this sounds more like compensation to avoid them being sued.  I do not believe this pay falls within any of the heads of tax in the UK, although of course it would be US taxable.  You may want to check the contract and compromise agreement you have reached on this issue.

It is just compensation so as not to be sued (the company - part of the UK government - has told me that it will be taxed... as if I had started working there and then been let go within the first month). I wasn't debating anything about it, I was just commenting that I would only be taxed for one month of wages as that's all I'm getting (as I thought the OP was thinking that you would get taxed on the equivalent of a whole year's wages even if you didn't work a whole year). I am a UK citizen, so whether or not it is US taxable is not relevant to me anyway.

I thought I said it was not UK taxable, so even if they deduct tax you could arguably reclaim it all on your UK return? 

I think ksand24 was referring to your comment:

although of course it would be US taxable. 

It doesn't apply to her because she's not a US citizen.