Redundancy Pay Tax Guide 2026/27
When you're made redundant, the tax treatment of your payment depends on what it includes.
Tax-Free Elements
| Payment Type | Tax Treatment |
|---|---|
| Statutory redundancy | Tax-free |
| Compensation up to £30,000 | Tax-free |
| Payments into pension | Tax-free |
Taxable Elements
| Payment Type | Tax Treatment |
|---|---|
| Notice pay | Taxed as normal |
| Holiday pay | Taxed as normal |
| Bonus/commission | Taxed as normal |
| Payment over £30,000 | Taxed as normal |
The £30,000 Exemption
First £30,000 of genuine redundancy compensation:
- No Income Tax
- No National Insurance
Over £30,000:
- Income Tax applies
- Class 1A NI for employer (not employee)
Pension Strategy
Consider asking employer to pay excess into pension:
- Tax-free for you
- Tax-deductible for employer
- Grows tax-free in pension
Related Calculators
- Redundancy Calculator - Calculate your pay
- Income Tax Calculator - Tax on payments