UK Redundancy Pay Calculator

When you are made redundant, the tax treatment of your payment depends on what it includes. The £30,000 tax-free exemption applies to qualifying termination payments — this covers statutory redundancy pay, enhanced or contractual redundancy pay above the statutory minimum, and any ex-gratia (goodwill) payments made as compensation for loss of employment.

Amounts above £30,000 are subject to income tax at your marginal rate, but crucially, no employee National Insurance contributions are due on qualifying termination payments, even on the taxable excess. Your employer, however, must pay Class 1A NIC at 15% on amounts over £30,000.

Certain elements of a redundancy package are always taxable in full and do not benefit from the £30,000 exemption. These include pay in lieu of notice (PILON), accrued holiday pay, salary arrears, and any contractual bonus or commission payments. These are treated as normal earnings and are subject to both income tax and employee National Insurance.

Since April 2018, HMRC applies the Post-Employment Notice Pay (PENP) formula to all termination payments. PENP calculates the minimum amount that must be treated as earnings for the unworked notice period, ensuring that notice pay is always taxed regardless of whether the employment contract contains a PILON clause. Only the residual amount after deducting PENP qualifies for the £30,000 exemption.

Your employer should deduct tax from any taxable amounts through PAYE before paying you. If you are a higher or additional rate taxpayer, or if the payment pushes you into a higher band, you may owe additional tax that can be collected through Self Assessment.

After redundancy, if you start a new job mid-year you may be put on an emergency tax code (W1, M1, or X). Check your new tax code to make sure you are not overpaying, and contact HMRC if your circumstances have changed.

Scenario: You earn £45,000 per year in England and receive a redundancy payment of £50,000. You have no PILON or holiday pay.

Step 1 — Tax-free portion: The first £30,000 is exempt from tax. Taxable excess: £50,000 − £30,000 = £20,000.

Step 2 — Marginal rate: Your £45,000 salary already uses the Personal Allowance (£12,570) and part of the basic rate band. You have £50,270 − £45,000 = £5,270 of basic rate band remaining.

Step 3 — Tax calculation:

• £5,270 taxed at 20% (basic rate) = £1,054
• £14,730 taxed at 40% (higher rate) = £5,892

Total tax: £6,946

Net payment: £50,000 − £6,946 = £43,054. No employee National Insurance is deducted on any part of the redundancy payment.

The official GOV.UK redundancy calculator works out your statutory entitlement only — the legal minimum based on age, service and the £751 weekly cap. It does not model the tax side of your payout.

This calculator covers both halves of the picture: the statutory entitlement and the tax treatment — the £30,000 exemption, income tax on the excess at England/Wales/NI or Scottish rates, PILON and holiday pay taxed as earnings, and your final net take-home. If your employer offers enhanced redundancy above the statutory minimum, you can enter the full package here, which the GOV.UK tool does not handle. Use GOV.UK to confirm your legal minimum; use this page to see what actually lands in your bank account.