Redundancy guide · 2026/27
Is my redundancy pay taxable?
The first £30,000 of qualifying termination payments is usually exempt from Income Tax. Your final payslip can also include earnings such as wages, holiday pay and notice pay, which are generally taxed through payroll.
How the £30,000 threshold works
Statutory redundancy pay and qualifying enhanced or voluntary redundancy payments generally count towards the same threshold. Paying the award in instalments does not create a fresh exemption for each payment. If you receive qualifying payments over £30,000, the excess is subject to Income Tax at the rates that apply to you. Employee National Insurance does not apply to that qualifying excess. Your employer generally pays Class 1A National Insurance on it.
Which payments go into the calculation?
- Statutory redundancy pay
- It normally counts towards the £30,000 exemption alongside other qualifying amounts. For England, Scotland and Wales, the statutory maximum for the 2026/27 rate period is £22,530, based on a weekly pay cap of £751. A combined award can still exceed the exemption.
- Enhanced redundancy or severance
- The qualifying portion generally counts towards the same exemption. Ask payroll to identify any amounts it has treated as earnings.
- Notice pay
- Payment in lieu of notice (PILON) is generally taxable as earnings and subject to employee National Insurance. Post-employment notice pay (PENP) is an HMRC calculation that can identify a taxable notice-pay element within a termination award.
- Unused holiday, wages and bonuses
- These are generally taxed as earnings and subject to National Insurance under the usual payroll rules.
Worked example
Suppose you receive £12,000 in statutory redundancy pay, £22,000 in qualifying enhanced redundancy pay and £3,000 in PILON. The qualifying award totals £34,000, of which £4,000 is subject to Income Tax. The £3,000 PILON is treated separately as earnings. Ask payroll for an itemised breakdown if the offer combines these amounts in one figure.
Use the redundancy pay calculator to estimate the statutory portion for Great Britain. The calculator estimates gross statutory pay.