Redundancy Pay Tax Calculator UK 2025/26
Find out how much tax you owe on your redundancy payment — including the £30,000 tax-free threshold and the tax on any amount above it.
The £30,000 Tax-Free Redundancy Exemption
The first £30,000 of a genuine redundancy payment is exempt from income tax in 2025/26. This covers statutory redundancy pay and any additional ex-gratia payment your employer makes as part of a genuine redundancy. There is no National Insurance on the redundancy element at all — even the taxable portion above £30,000 is subject only to income tax, not NI.
| Component | Income Tax | National Insurance |
|---|---|---|
| Statutory redundancy pay (within £30k total) | Tax-free | NI-free |
| Enhanced / ex-gratia payment (within £30k total) | Tax-free | NI-free |
| Redundancy above £30,000 | Taxable at marginal rate | NI-free |
| Notice pay (PILON) | Fully taxable | NI charged |
| Outstanding holiday pay | Fully taxable | NI charged |
Statutory Redundancy Pay Calculation 2025/26
Statutory redundancy pay is calculated using your age, weekly pay (capped at £719 from April 2025), and length of service (up to 20 years). The weekly rate applied depends on your age during each year of service.
| Age During Each Year of Service | Weekly Pay Multiplier |
|---|---|
| Under 22 | Half a week’s pay |
| 22 to 40 | One week’s pay |
| 41 and over | One and a half weeks’ pay |
The maximum statutory redundancy payment in 2025/26 is £21,570 (20 years × 1.5 × £719). Most employees receive far less, but employers often top this up with an enhanced package.
Notice Pay Is Always Taxable
Notice pay — whether you work your notice period or receive payment in lieu of notice (PILON) — is treated as earnings and is fully subject to income tax and National Insurance. It cannot benefit from the £30,000 redundancy exemption. This is a common source of confusion when receiving a redundancy package.
Does a Large Redundancy Payment Affect Your Tax Band?
The taxable portion of your redundancy payment (above £30,000) is added to your other income for the tax year. If the combined total pushes you into the higher rate band, the excess is taxed at 40% rather than 20%. If this is likely, it may be worth considering making a pension contribution from the taxable redundancy amount, which reduces your adjusted net income and could keep you in the basic rate band.