Redundancy Tax Calculator UK

Calculate your statutory redundancy pay and tax liability for 2024/25

Tax Year

Your Age at Redundancy

Years of Service

Average Weekly Pay (Gross)

Current Weekly Pay Cap: £719 (Maximum used for statutory calculation)

Your Statutory Redundancy Entitlement

Gross Redundancy Pay £0.00

Tax-Free Amount £0.00

Taxable Amount £0.00

Income Tax £0.00

National Insurance £0.00

Net Payment (Take Home) £0.00

Total Redundancy Package (Including Statutory)

Current Annual Salary

Other Income This Tax Year

Important: Redundancy payments above £30,000 are taxable and may affect your personal allowance if total income exceeds £100,000.

Tax Breakdown on Enhanced Package

Total Redundancy Package £0.00

Tax-Free Portion (First £30,000) £0.00

Taxable Portion £0.00

Total Income Tax Due £0.00

National Insurance (NI) £0.00

Net Redundancy Payment £0.00

Effective Tax Rate 0%

Redundancy Package Amount

Current Annual Salary

Your Current Age

Amount to Contribute to Pension

Pension Contribution Benefits: Amounts paid into your pension avoid immediate income tax and may result in employer National Insurance savings that could increase your package.

Pension Contribution Analysis

Scenario	Take as Cash	Contribute to Pension
Tax-Free Portion	£0.00	£0.00
Taxable Portion	£0.00	£0.00
Income Tax Paid	£0.00	£0.00
Net Cash Received	£0.00	£0.00
Pension Value	£0.00	£0.00
Total Value	£0.00	£0.00

Note: Pension contributions cannot be accessed until age 55 (rising to 57 from 2028). Consider your immediate financial needs before committing funds to pension.

How to Use This Calculator

Statutory Redundancy Calculator

Select the appropriate tax year based on when your redundancy takes effect
Enter your age at the date of redundancy
Input your complete years of continuous service (partial years don’t count)
Enter your average weekly gross pay from the last 12 weeks before your redundancy notice
Click calculate to see your statutory entitlement

Enhanced Package Calculator

Enter the total redundancy amount offered by your employer
Input your current annual salary and any other income for the tax year
The calculator will show tax implications including effects on personal allowance

Pension Contribution Planner

Enter your redundancy package amount
Input your salary and age
Specify how much you’d like to contribute to your pension
Compare the take-home value of cash versus pension contribution

Statutory Redundancy Pay Explained

Statutory redundancy pay is a legal entitlement for employees with at least 2 years of continuous service. The amount depends on three factors: your age, length of service, and weekly pay.

Calculation Method

Your redundancy pay is calculated using this formula for each complete year of service:

Under 22 years old: 0.5 week’s pay per year
22 to 40 years old: 1 week’s pay per year
41 years and over: 1.5 week’s pay per year

Maximum Limits: Only the last 20 years of service count towards redundancy pay. For 2025/26, weekly pay is capped at £719, making the maximum statutory redundancy payment £21,570.

Weekly Pay Calculation

Your weekly pay is the average gross amount you earned per week over the 12 weeks before receiving your redundancy notice. This includes:

Basic salary or wages
Regular overtime payments
Commission and bonuses that are part of normal pay
Statutory payments like sick pay or maternity pay

Tax Treatment of Redundancy Payments

Redundancy payments receive preferential tax treatment compared to regular income, but amounts above certain thresholds are taxable.

£30,000 Tax-Free Allowance

The first £30,000 of any genuine redundancy payment is completely free from income tax and National Insurance contributions. This applies whether you receive statutory redundancy pay or an enhanced package from your employer.

Taxation Above £30,000

Any redundancy payment exceeding £30,000 is subject to income tax at your marginal rate, but crucially, no National Insurance is deducted. The taxable portion is added to your other income for the tax year.

Income Band (2024/25)	Tax Rate	Applies To
Personal Allowance	0%	Up to £12,570
Basic Rate	20%	£12,571 – £50,270
Higher Rate	40%	£50,271 – £125,140
Additional Rate	45%	Over £125,140

Personal Allowance Tapering

A critical consideration for higher earners: if your total income (including taxable redundancy) exceeds £100,000, you lose £1 of personal allowance for every £2 over this threshold. This creates an effective tax rate of 60% on income between £100,000 and £125,140.

Example: If you earn £80,000 annually and receive a £60,000 redundancy package, the first £30,000 is tax-free. The next £20,000 is taxed at 40%. However, the final £10,000 pushes your income over £100,000, triggering personal allowance tapering and an effective 60% tax rate on that portion.

Pension Contribution Strategy

Contributing part of your redundancy payment to a pension can significantly reduce your tax liability whilst building retirement savings.

How It Works

You can request your employer to pay some or all of the taxable portion (above £30,000) directly into your workplace pension as a final employer contribution. This provides several advantages:

Immediate income tax relief on the contributed amount
Potential employer National Insurance savings (13.8%) that may be shared with you
Tax-free growth within the pension wrapper
25% tax-free lump sum available when you access the pension
Flexibility to draw remaining funds at your chosen tax rate in retirement

Considerations Before Contributing

Whilst pension contributions offer tax advantages, several factors require careful thought:

Access restrictions: You cannot access pension funds until age 55 (rising to 57 from 2028)
Immediate needs: Consider whether you need cash for living expenses whilst job hunting
Annual allowance: Pension contributions are subject to annual limits (£60,000 for 2024/25)
Lifetime allowance: Although abolished from April 2024, lump sum allowances still apply
Tapered allowance: High earners may have reduced annual allowance

Potential Bonus: Employers save 13.8% National Insurance on pension contributions versus PAYE payments. Many employers will share part or all of this saving, effectively increasing your redundancy package when you choose the pension route.

Eligibility Requirements

Who Qualifies for Statutory Redundancy Pay?

To be entitled to statutory redundancy pay, you must meet all these criteria:

You are an employee (not a contractor or self-employed)
You have worked continuously for your employer for at least 2 years
You are being made redundant (your job role is no longer needed)
You have not been dismissed for misconduct

What Counts as Continuous Service?

Continuous employment is unbroken service with the same employer. The following situations typically maintain continuity:

Periods of sick leave or maternity/paternity leave
Business transfers under TUPE regulations
Gaps of less than one week between contracts
Temporary lay-offs arranged by the employer

Enhanced Redundancy Schemes

Many employers offer enhanced redundancy packages that exceed statutory minimums. These might include:

Higher multipliers (e.g., 2 weeks’ pay instead of 1.5)
No cap on weekly pay
Additional payments based on performance or loyalty
Extended notice periods with full pay
Outplacement support and career coaching

Common Scenarios Analysed

Scenario 1: Young Professional

Profile: Age 28, 6 years service, £600 weekly pay

Calculation: 6 years × 1 week’s pay × £600 = £3,600

Tax: Entire amount is tax-free (under £30,000 threshold)

Net payment: £3,600

Scenario 2: Mid-Career Employee

Profile: Age 45, 15 years service, £800 weekly pay (capped at £719)

Calculation: (3 years × 1 week × £719) + (12 years × 1.5 weeks × £719) = £2,157 + £12,942 = £15,099

Tax: Entire amount is tax-free

Net payment: £15,099

Scenario 3: Senior Employee with Maximum Entitlement

Profile: Age 55, 25 years service (20 counted), £900 weekly pay (capped at £719)

Calculation: 20 years × 1.5 weeks × £719 = £21,570 (maximum)

Tax: Entire amount is tax-free

Net payment: £21,570

Scenario 4: Enhanced Package Above £30,000

Profile: £50,000 package, £50,000 annual salary

Tax-free: £30,000

Taxable at 40%: £20,000 (pushes into higher rate band)

Tax due: £8,000

Net payment: £42,000

Scenario 5: High Earner with Personal Allowance Impact

Profile: £80,000 salary, £60,000 redundancy package

Tax-free: £30,000

Taxable: £30,000 (£20,000 at 40%, £10,000 at effective 60%)

Tax due: £14,000

Net payment: £46,000

Frequently Asked Questions

Is redundancy pay tax-free in the UK?

The first £30,000 of genuine redundancy pay is tax-free. Any amount above £30,000 is subject to income tax at your marginal rate, but no National Insurance is charged on redundancy payments.

How many years of service do I need for redundancy pay?

You must have at least 2 complete years of continuous service with your employer to qualify for statutory redundancy pay. Partial years do not count.

What is the maximum statutory redundancy payment?

For redundancies from 6 April 2025, the maximum is £21,570. This is calculated as 20 years × 1.5 weeks × £719 weekly cap. The previous year’s maximum was £21,000.

Can my employer offer less than statutory redundancy?

No. Statutory redundancy pay is the legal minimum. Your employer must pay at least this amount if you qualify. Many employers offer enhanced packages that exceed statutory requirements.

Does redundancy pay affect my benefits?

Redundancy payments can affect means-tested benefits. The first £30,000 is typically disregarded, but amounts above this may be treated as capital when calculating entitlement to benefits like Universal Credit.

What if my employer can’t pay my redundancy?

If your employer is insolvent, you can claim statutory redundancy pay from the government’s Redundancy Payments Service. Claims must be made within 6 months of employment ending.

Should I take redundancy pay as cash or put it in my pension?

This depends on your age, financial circumstances, and immediate needs. Pension contributions save tax immediately but cannot be accessed until age 55. Consider consulting a financial adviser for personalised guidance.

Do I pay National Insurance on redundancy payments?

No. Genuine redundancy payments are exempt from National Insurance contributions, regardless of the amount. This applies to both the tax-free portion and any taxable amount above £30,000.

How is weekly pay calculated if my hours vary?

For variable hours or pay, calculate the average over the 12 weeks before your redundancy notice. Include all regular payments such as overtime, commission, and bonuses that form part of your normal remuneration.

Can I negotiate my redundancy package?

Yes. Whilst you cannot negotiate below statutory minimums, you can discuss enhanced terms. Consider negotiating extended notice periods, pension contributions, outplacement support, or higher payment multipliers.

Payment Timeline and Process

Redundancy payments should be made on or before your last day of employment. The process typically follows these steps:

Consultation period: Employers must consult with affected employees before confirming redundancy
Redundancy notice: You receive formal notice of redundancy with your termination date
Notice period: You work your notice period or receive payment in lieu
Final payment: Redundancy pay is processed through payroll on your final pay date
Tax processing: Your employer deducts any tax due via PAYE
P45 issued: You receive a P45 showing all payments and tax deducted

What Your Redundancy Package Might Include

Statutory or enhanced redundancy payment
Payment in lieu of notice (PILON)
Holiday pay for unused annual leave
Outstanding bonus or commission payments
Company car or benefits compensation
Ex-gratia payments (discretionary amounts)

Important: Not all payments in a redundancy package qualify for the £30,000 tax-free allowance. Payment in lieu of notice and holiday pay are usually taxable. Only genuine redundancy compensation qualifies for tax relief.

References

HM Revenue & Customs. (2024). Employment Income Manual EIM13850 – Termination payments and benefits: £30,000 threshold. Available at: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim13850
GOV.UK. (2024). Calculate your statutory redundancy pay. Available at: https://www.gov.uk/calculate-your-redundancy-pay
Department for Business and Trade. (2025). Redundancy payments: Rates and limits 2025/26. The Insolvency Service.
HM Revenue & Customs. (2024). Tax on termination payments (Employer guidance). Available at: https://www.gov.uk/guidance/tax-on-termination-payments
MoneyHelper. (2024). Redundancy pay calculator. Money and Pensions Service. Available at: https://www.moneyhelper.org.uk/en/work/losing-your-job/redundancy-pay-calculator
Advisory, Conciliation and Arbitration Service (Acas). (2024). Redundancy: your rights. Available at: https://www.acas.org.uk/redundancy