{"id":219,"date":"2026-01-28T14:27:35","date_gmt":"2026-01-28T14:27:35","guid":{"rendered":"https:\/\/myinformernews.com\/uk\/?p=219"},"modified":"2026-07-27T09:01:15","modified_gmt":"2026-07-27T09:01:15","slug":"is-redundancy-pay-taxable","status":"publish","type":"post","link":"https:\/\/myinformernews.com\/uk\/is-redundancy-pay-taxable\/","title":{"rendered":"Is Redundancy Pay Taxable? UK Tax Rules Explained Simply"},"content":{"rendered":"\n

If you\u2019ve been made redundant, one of the first questions you\u2019ll ask is: is redundancy pay taxable?<\/strong>
The short answer is partly<\/strong>. Some redundancy payments are tax<\/a> free, while others are taxed like normal income.<\/p>\n\n\n\n

Understanding the difference can help you avoid surprises and keep more of your payout.<\/p>\n\n\n\n

Is Redundancy Pay Taxable in the UK?<\/h2>\n\n\n\n

In the UK, up to \u00a330,000 of redundancy pay is tax free<\/strong>.
Anything above \u00a330,000 is subject to Income Tax<\/strong>, but not National Insurance<\/strong>.<\/p>\n\n\n\n

However, not every payment you receive when leaving a job counts as \u201credundancy pay\u201d. Some parts of your final payout are always taxable<\/strong>, even if your redundancy payment itself is under \u00a330,000.<\/p>\n\n\n\n

What Payments Can You Receive When You\u2019re Made Redundant?<\/h2>\n\n\n\n

When your employment ends due to redundancy, you may receive a termination payment<\/strong>, which can include:<\/p>\n\n\n\n

    \n
  • Statutory redundancy pay<\/li>\n\n\n\n
  • Contractual redundancy pay (enhanced redundancy)<\/li>\n\n\n\n
  • Holiday pay you haven\u2019t used<\/li>\n\n\n\n
  • Unpaid wages<\/li>\n\n\n\n
  • Bonuses or commission<\/li>\n\n\n\n
  • Payment in lieu of notice (PILON)<\/li>\n\n\n\n
  • Non-cash benefits (for example, a company car or laptop)<\/li>\n<\/ul>\n\n\n\n

    Each of these is taxed differently.<\/p>\n\n\n\n

    What Part of Redundancy Pay Is Tax Free?<\/h2>\n\n\n\n

    The following payments count towards the \u00a330,000 tax-free limit<\/strong>:<\/p>\n\n\n\n

      \n
    • Statutory redundancy pay<\/li>\n\n\n\n
    • Enhanced or contractual redundancy pay<\/li>\n\n\n\n
    • Non-contractual ex-gratia or goodwill payments<\/li>\n<\/ul>\n\n\n\n

      As long as the total of these payments is \u00a330,000 or less<\/strong>, you pay no Income Tax and no National Insurance<\/strong> on them.<\/p>\n\n\n\n

      What Part of Redundancy Pay Is Taxable?<\/h2>\n\n\n\n

      Some payments are treated as normal earnings<\/strong>, not redundancy pay. These are always taxable<\/strong>, even if your redundancy payment is small.<\/p>\n\n\n\n

      You will pay Income Tax and National Insurance<\/strong> on:<\/p>\n\n\n\n

        \n
      • Holiday pay<\/li>\n\n\n\n
      • Unpaid wages<\/li>\n\n\n\n
      • Bonuses, commission, or overtime<\/li>\n\n\n\n
      • Payment in lieu of notice (PILON)<\/li>\n<\/ul>\n\n\n\n

        These are taxed in the same way as your regular salary.<\/p>\n\n\n\n

        Is Payment in Lieu of Notice (PILON) Taxable?<\/h2>\n\n\n\n

        Yes. All PILON payments are fully taxable<\/strong>.<\/p>\n\n\n\n

        If your employer lets you leave without working your notice period, they must calculate what you would have earned during that time. That amount is:<\/p>\n\n\n\n

          \n
        • Subject to Income Tax<\/li>\n\n\n\n
        • Subject to National Insurance<\/li>\n<\/ul>\n\n\n\n

          PILON does not<\/strong> fall under the \u00a330,000 tax-free redundancy limit.<\/p>\n\n\n\n

          Are Non-Cash Benefits Taxable?<\/h2>\n\n\n\n

          Yes. If you keep non-cash benefits after redundancy, such as:<\/p>\n\n\n\n

            \n
          • A company car<\/li>\n\n\n\n
          • A laptop or phone<\/li>\n<\/ul>\n\n\n\n

            HMRC assigns a cash value<\/strong> to those benefits. That value is added to your redundancy pay total and may push you over the \u00a330,000 tax-free limit<\/strong>.<\/p>\n\n\n\n

            Example: Tax-Free Redundancy Pay<\/h2>\n\n\n\n

            Example 1<\/strong><\/p>\n\n\n\n

            Colin receives:<\/p>\n\n\n\n

              \n
            • \u00a318,000 redundancy pay<\/li>\n\n\n\n
            • \u00a31,000 payment in lieu of notice<\/li>\n<\/ul>\n\n\n\n

              The result:<\/p>\n\n\n\n

                \n
              • \u00a318,000 is tax free<\/li>\n\n\n\n
              • \u00a31,000 is taxed like normal wages<\/li>\n<\/ul>\n\n\n\n

                Example: Redundancy Pay Over \u00a330,000<\/h2>\n\n\n\n

                Example 2<\/strong><\/p>\n\n\n\n

                Kirandeep receives:<\/p>\n\n\n\n

                  \n
                • \u00a332,000 redundancy pay<\/li>\n\n\n\n
                • A company car worth \u00a38,000<\/li>\n<\/ul>\n\n\n\n

                  Total value: \u00a340,000<\/strong><\/p>\n\n\n\n

                  The result:<\/p>\n\n\n\n

                    \n
                  • \u00a330,000 is tax free<\/li>\n\n\n\n
                  • \u00a310,000 is taxable<\/li>\n\n\n\n
                  • If she\u2019s a higher-rate taxpayer, she pays 40% tax on \u00a310,000<\/strong><\/li>\n<\/ul>\n\n\n\n

                    Do You Pay National Insurance on Redundancy Pay?<\/h2>\n\n\n\n
                      \n
                    • No National Insurance<\/strong> on redundancy pay (even above \u00a330,000)<\/li>\n\n\n\n
                    • National Insurance does apply<\/strong> to wages, holiday pay, bonuses, and PILON<\/li>\n<\/ul>\n\n\n\n

                      Can You Be Overpaid or Underpaid Tax?<\/h2>\n\n\n\n

                      Yes, this is common.<\/p>\n\n\n\n

                      Redundancy often happens part-way through the tax year. Your employer may not deduct the correct amount of tax, especially on large one-off payments.<\/p>\n\n\n\n

                      You may need to:<\/p>\n\n\n\n

                        \n
                      • Claim a tax refund<\/li>\n\n\n\n
                      • Pay additional tax later<\/li>\n<\/ul>\n\n\n\n

                        HMRC may ask you to complete a Self Assessment tax return<\/strong> to correct this.<\/p>\n\n\n\n

                        How to Make the Most of Your Redundancy Pay<\/h2>\n\n\n\n

                        If you don\u2019t need all your redundancy money immediately, consider:<\/p>\n\n\n\n

                          \n
                        • Paying off high-interest debt<\/li>\n\n\n\n
                        • Building an emergency fund<\/li>\n\n\n\n
                        • Making pension contributions<\/li>\n<\/ul>\n\n\n\n

                          In some cases, employers may agree to pay amounts above \u00a330,000 directly into your pension, which can reduce tax. Because pension rules are complex, professional advice is strongly recommended.<\/p>\n\n\n\n

                          Key Takeaway: Is Redundancy Pay Taxable?<\/h2>\n\n\n\n
                            \n
                          • Up to \u00a330,000 of redundancy pay is tax free<\/strong><\/li>\n\n\n\n
                          • Holiday pay, wages, bonuses, and PILON are always taxable<\/strong><\/li>\n\n\n\n
                          • Benefits in kind can push you over the tax-free limit<\/li>\n\n\n\n
                          • Employers don\u2019t always deduct the correct tax<\/li>\n<\/ul>\n\n\n\n

                            Important Disclaimer<\/p>\n\n\n\n

                            This article is for general information only and does not constitute tax or financial advice. Tax rules can change, and your personal circumstances matter. Always seek professional advice before making decisions based on redundancy payments.<\/p>\n","protected":false},"excerpt":{"rendered":"

                            If you\u2019ve been made redundant, one of the first questions you\u2019ll ask is: is redundancy pay taxable?The short answer is partly. Some redundancy payments are tax free, while others are taxed like normal income. Understanding the difference can help you avoid surprises and keep more of your payout. Is Redundancy Pay Taxable in the UK? […]<\/p>\n","protected":false},"author":1,"featured_media":220,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"iawp_total_views":13,"footnotes":""},"categories":[14],"tags":[],"class_list":["post-219","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-benefits"],"_links":{"self":[{"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/posts\/219","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/comments?post=219"}],"version-history":[{"count":1,"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/posts\/219\/revisions"}],"predecessor-version":[{"id":221,"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/posts\/219\/revisions\/221"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/media\/220"}],"wp:attachment":[{"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/media?parent=219"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/categories?post=219"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/myinformernews.com\/uk\/wp-json\/wp\/v2\/tags?post=219"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}