Do you pay tax on redundancy pay?

For people being made redundant who want to know how much of their payment will be taxed.

Applies to: England, Scotland, Wales, Northern Ireland Last checked against official sources: 6 October 2026

You usually pay no tax on the first £30,000 of redundancy pay, but some parts of a leaving payment are always taxed.

The first £30,000 of statutory redundancy pay, extra redundancy pay and non-cash benefits combined is usually tax free.
You pay tax on anything over £30,000, and your employer pays employer National Insurance on it.
Unpaid wages, holiday pay, bonuses and pay for notice you did not work are taxed like normal pay.
Your employer takes the tax from your final payslip.
A payment made after your P45 is taxed using the 0T tax code.

Key facts

First £30,000 usually tax free
Holiday and notice pay taxed
Over £30,000: Income Tax due
GB statutory pay cap: £751 a week

What tax on redundancy pay means

When you lose your job, your employer may give you a "termination payment". This can be made up of several parts, such as statutory redundancy pay, extra redundancy pay from your employer, unpaid wages, holiday pay and pay for your notice period. Each part is treated differently for tax.

What is tax free and what is taxed

Part of your payment	Income Tax	National Insurance
Statutory redundancy pay, extra (enhanced) redundancy pay and non-cash benefits, up to £30,000 combined	No	No
The amount of those over £30,000	Yes	Your employer pays employer Class 1A on it
Unpaid wages, holiday pay and bonuses	Yes	Yes
Pay for notice you did not work (including pay in lieu of notice)	Yes	Yes
Employer payments into a registered pension scheme	No	No

The £30,000 is one total for the redundancy parts added together. It is not £30,000 for each part.

The notice pay rule

If you did not work your full notice, the part of your payment equal to what you would have earned in that notice period is taxed like wages. This is called post-employment notice pay. It applies even if your employer calls the money redundancy pay.

For example, GOV.UK describes someone who gets £10,000 statutory redundancy pay and £5,000 extra severance pay, where their unworked notice is worth £2,000. They pay tax and National Insurance on £2,000. The other £13,000 is not taxed.

How much statutory redundancy pay is

You usually get statutory redundancy pay if you are an employee with 2 years' service or more. For redundancies on or after 6 April 2026:

Your age for each full year worked	Pay for each year
Under 22	Half a week's pay
22 to 40	1 week's pay
41 or older	1.5 weeks' pay

In England, Scotland and Wales, weekly pay is capped at £751 and the most you can get is £22,530. Up to 20 years' service counts. Statutory redundancy pay on its own is always under £30,000, so it is tax free.

Worked example: you are 52, have worked for your employer for 10 years (all after turning 41) and earn £800 a week. Your weekly pay is capped at £751. You get 1.5 x 10 x £751 = £11,265, all tax free.

How the tax is taken

Your employer takes any tax and National Insurance from your final payslip through PAYE. If you are paid after you have been given your P45, the payment is taxed using the 0T tax code. This code gives no tax-free Personal Allowance, so you may pay too much at first.

A large payment can also push your income for the year into a higher tax band. If you think you paid too much tax, contact HM Revenue and Customs (HMRC). If you fill in a Self Assessment tax return, include the payment.

If you live in Scotland or Northern Ireland

The £30,000 rule is the same. In Scotland, any taxable part is taxed at Scottish Income Tax rates, which run from 19% to 48% in 2026/27. In Northern Ireland, statutory redundancy pay has its own limits: weekly pay is capped at £783 and the most you can get is £23,490.

Related guides

Where this comes from

Redundancy: tax and National Insurance (GOV.UK)
Redundancy pay (GOV.UK)
Termination payments and tax when you leave a job (GOV.UK)
What you pay tax and National Insurance on (GOV.UK)
How tax and National Insurance are deducted (GOV.UK)
Scottish Income Tax (GOV.UK)
Redundancy pay in Northern Ireland (nidirect)

Get it done

This takes you to the official service, which is free to use.

Check what you pay tax on

Common questions

Is statutory redundancy pay taxable?

No. Statutory redundancy pay under £30,000 is not taxable.

Do I pay National Insurance on redundancy pay over £30,000?

Your employer pays employer Class 1A National Insurance on any amount over a combined £30,000. You pay Income Tax on it.

Why was so much tax taken from my redundancy pay?

If you were paid after getting your P45, your employer had to use the 0T tax code, which gives no tax-free allowance. Contact HMRC if you think you paid too much.

Official sources

1.Redundancy: tax and National Insurance (GOV.UK)www.gov.uk/redundancy-your-rights/tax-and-national-insurance
2.Termination payments: what you pay tax and National Insurance on (GOV.UK)www.gov.uk/termination-payments-and-tax-when-you-leave-a-job/what-you-pay-tax-and-national-insurance-on
3.Termination payments: how tax and National Insurance are deducted (GOV.UK)www.gov.uk/termination-payments-and-tax-when-you-leave-a-job/how-tax-and-national-insurance-are-deducted

Checked against GOV.UK on 6 October 2026

Ask about your situation

Please don't include your name, address, National Insurance number or health details. See our privacy notice.