Redundancy Pay & Tax Calculator
Work out your statutory redundancy pay from your age, years of service and weekly pay (capped at £751 a week for redundancies from 6 April 2026), then the tax on your whole leaving package. The first £30,000 of redundancy pay is tax-free; notice pay and holiday pay are taxed like wages.
Updated 2026-10-08 · 2026/27 HMRC rates
| Redundancy pay (statutory + enhanced) | £8,400.00 |
| Tax-free (first £30,000) | £8,400.00 |
| Taxable redundancy over the threshold | £0.00 |
| Notice and holiday pay (taxed as wages) | £0.00 |
| Income tax on the package | £0.00 |
| Employee NI (notice and holiday pay only) | £0.00 |
| You receive | £8,400.00 |
| Employer Class 1A NI on the excess | £0.00 |
Payments made after your P45 is issued are usually taxed on code 0T, so the payslip may take more than this year-end figure; the difference comes back through Self Assessment, a P800 or your next employer.
- Tax-free £8,400 100.0%
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Key facts
- The personal allowance stays at £12,570 in 2026/27 and is reduced by £1 for every £2 of adjusted net income over £100,000, so it is gone entirely at £125,140 (HMRC income tax rates and allowances).
- In England, Wales and Northern Ireland, 2026/27 income tax is 20% on the first £37,700 of taxable income, 40% up to £125,140 and 45% above that (HMRC rates and thresholds for employers 2026 to 2027).
- Scotland has six bands in 2026/27: 19% starter on the first £3,967 of taxable income, 20% basic to £16,956, 21% intermediate to £31,092, 42% higher to £62,430, 45% advanced to £125,140 and 48% top above that (HMRC rates and thresholds for employers 2026 to 2027).
- Budget 2025 extended the freeze on income tax thresholds and the equivalent employee and self-employed National Insurance thresholds for a further three years, from April 2028 to April 2031 (HM Treasury Budget 2025).
- Employees pay Class 1 National Insurance at 8% on earnings between £12,570 and £50,270 a year and 2% above that in 2026/27 (HMRC rates and thresholds for employers 2026 to 2027).
- Employers pay 15% National Insurance on earnings above the £5,000 secondary threshold, and eligible employers can claim an Employment Allowance of £10,500 (HMRC rates and thresholds for employers 2026 to 2027).
- Self-employed people pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above that; voluntary Class 2 costs £3.65 a week if profits are below £7,105 (GOV.UK self-employed National Insurance rates).
- Dividend tax rose by 2 percentage points from April 2026: the basic rate is now 10.75% and the higher rate 35.75%, while the additional rate stays at 39.35% and the dividend allowance stays at £500 (GOV.UK tax on dividends).
Related
- Salary after tax calculator
- Holiday entitlement calculator
- Tax refunds and P800
- Pension tax relief calculator
How statutory redundancy pay is worked out
You are entitled to statutory redundancy pay if you are an employee with at least 2 years’ continuous service. For each full year you get half a week’s pay for years when you were under 22, one week’s pay for years aged 22 to 40, and one and a half weeks’ pay for years aged 41 or older. Only the last 20 years count, and weekly pay is capped at £751 for redundancies on or after 6 April 2026, so the most you can get is £22,530.
Weekly pay is your normal gross pay. If your hours or pay vary, it is the average over the last 12 weeks. Many employers pay more under an enhanced scheme or contract, which the calculator adds on top.
| Age | Years of service | Weekly pay | Weeks | Statutory redundancy pay |
|---|---|---|---|---|
| 25 | 4 | £520 | 3.5 | £1,820 |
| 35 | 8 | £650 | 8 | £5,200 |
| 45 | 12 | £800 | 14 | £10,514 |
| 55 | 20 | £900 | 27 | £20,277 |
| 62 | 30 | £1,200 | 30 | £22,530 |
Is redundancy pay taxed?
The first £30,000 of redundancy pay, statutory and enhanced added together, is free of income tax, and there is no employee National Insurance on it. The rest of a leaving package is treated differently:
- Redundancy pay above £30,000 is taxed as income at your marginal rate. There is no employee NI, but your employer pays 15% Class 1A NI on the excess.
- Payment in lieu of notice (PILON) is taxed and NI’d like normal wages.
- If you are not paid for your full notice period, part of the redundancy award is treated as post-employment notice pay (PENP) and taxed as earnings. HMRC’s formula is (basic pay in the last pay period × days in the notice period ÷ days in that pay period) − any notice pay already given.
- Holiday pay, unpaid wages, bonuses and commission are taxed and NI’d as earnings.
- Employer contributions into a registered pension scheme are not taxed, so putting part of the package into your pension can cut the tax bill.
How much tax will I pay on £60,000 redundancy?
Take £60,000 of redundancy pay for someone who has already earned £40,000 in the tax year, outside Scotland. The first £30,000 is tax-free. The other £30,000 is added to the £40,000, which pushes most of it into the 40% band. Income tax on the package is £9,946, so £50,054 is left. The employer also pays £4,500 in Class 1A NI.
In Scotland the same package costs £11,831 in tax because of the 42% higher rate. Leaving early in the tax year, before much salary has been earned, can keep more of the taxable part in the basic-rate band.
| Redundancy package | Tax-free | Taxable | Income tax (other pay £35,000) | You keep |
|---|---|---|---|---|
| £25,000 | £25,000 | £0 | £0 | £25,000 |
| £40,000 | £30,000 | £10,000 | £2,000 | £38,000 |
| £60,000 | £30,000 | £30,000 | £8,946 | £51,054 |
| £100,000 | £30,000 | £70,000 | £25,946 | £74,054 |
Notice pay and holiday pay
Someone earning £20,000 so far this year who receives £10,000 redundancy, £6,000 notice pay and £1,500 holiday pay keeps the £10,000 tax-free. The £7,500 of notice and holiday pay costs £1,500 in tax and £600 in NI, so the package is worth £15,400 after deductions.
Statutory notice is at least one week for every year of service, up to 12 weeks. Your contract may give you more.
Your P45, emergency tax and getting tax back
If your employer pays anything after issuing your P45, it must use code 0T on a non-cumulative basis, so no tax-free allowance is applied and the slip can show far more tax than you owe for the year. You get the difference back from your next employer’s payroll, by claiming with form P50 if you are not working, through a P800 after the year ends, or through Self Assessment.
Frequently asked questions
Is redundancy pay taxed?
Not on the first £30,000, and there is no employee NI on it. Anything above that is taxed as income; notice pay and holiday pay are always taxed and NI'd.
Is redundancy pay taxable?
Not the first £30,000. Above that it is taxed as income, without employee NI. Notice pay, holiday pay and bonuses are always taxed and NI’d.
How much tax will I pay on £60,000 redundancy?
With £40,000 of other pay this year and no pension contributions, about £9,946 outside Scotland: nothing on the first £30,000, then mostly 40% on the rest.
What is the maximum statutory redundancy pay?
£22,530: 20 years at one and a half weeks of the £751 weekly cap.
Is payment in lieu of notice taxable?
Yes. PILON and post-employment notice pay are taxed and NI’d as earnings, even when paid with redundancy.
Can I pay my redundancy into my pension?
Yes, if your employer agrees to pay it in directly. Employer contributions are not taxed but count towards your annual allowance.
Sources
Figures are taken from official government publications and were last reviewed on 2026-10-08.
- HMRC: Rates and thresholds for employers 2026 to 2027
- GOV.UK: Tax on dividends
- HM Treasury: Budget 2025
- HMRC: Income Tax rates and allowances for current and past years
- GOV.UK: Tax on savings interest – how much is tax free
- GOV.UK: Self-employed National Insurance rates
- HMRC: Capital Gains Tax rates and annual tax-free allowances
- GOV.UK: Business Asset Disposal Relief
- HMRC: Pension schemes rates and allowances
- HMRC: Work out your tapered annual allowance
- GOV.UK: Workplace pensions – what you, your employer and the government pay
- The Pensions Regulator: Work out who to put into a pension
- HMRC: Corporation Tax rates and allowances
- HMRC: Tax credits, Child Benefit and Guardian’s Allowance rates
- GOV.UK: High Income Child Benefit Charge
- GOV.UK: Marriage Allowance
- GOV.UK: Tax-free allowances on property and trading income
- GOV.UK: Tax-Free Childcare
- GOV.UK: VAT rates
- GOV.UK: VAT registration – when to register
- GOV.UK: Redundancy – your rights: redundancy pay
- GOV.UK: Redundancy – notice periods
- GOV.UK: Redundancy – tax and National Insurance
- HMRC: Employment Income Manual EIM13505 – termination payments and the £30,000 threshold
- HMRC: Employment Income Manual EIM13880 – post-employment notice pay formula
- GOV.UK: Emergency tax codes
- GOV.UK: Tax overpayments and underpayments (P800)
Reviewed by Kashif Nazir Khan on 2026-10-08 · software engineer and developer with an interest in accounting and taxation