The answer to the compensation payments taxable question is technically: “No”, but the amount of lost income you receive was already adjusted for tax. Let me expand a little further on that answer.
The first £30,000 of any non-contractual compensation paid to you by your employer as a result of the termination of your employment may be tax-free. This includes any compensation for: a payment for damages for breach of contract.
Until January 2014 such compensation was (by ESC D33) tax-free without limit. From January 2014 only the first £500,000 is tax-free: beyond that a claim to exemption must be made and HMRC will review the position on a case-by-case basis. However, HMRC confirm that a claim will be accepted if three conditions are all met, namely: