UK · Tax
Redundancy tax estimator
Estimate the tax on a UK redundancy package. Splits the payment into tax-free and taxable portions using the £30,000 termination allowance, then applies a flat marginal rate to the taxable amount to give a rough net figure. Illustrative only.
Redundancy tax estimator
The amount your employer must pay by law. Use the redundancy pay calculator if you’re not sure.
Anything offered on top of statutory.
England, Wales and Northern Ireland rates.
Estimated net of the full package
£13,548
From £15,900 gross. Tax-free portion: £7,500. Taxable as earnings: £8,400 (at 28% combined).
| Element | Gross | Tax treatment |
|---|---|---|
| Statutory redundancy | £7,500 | Tax-free up to £30,000 combined |
| Ex-gratia | £0 | Tax-free up to remaining allowance |
| PILON | £7,200 | Fully taxable |
| Holiday pay | £1,200 | Fully taxable |
Illustrative estimate. The flat marginal rate applied to the taxable amount won’t exactly match your final payslip; real PAYE uses your tax code and bands.
Final figures may vary. This is a rough net-of-tax guide; for precise figures, consult an accountant or use HMRC’s personal tax account.
How this is calculated
The £30,000 allowance covers statutory redundancy first, then any ex-gratia amount, capped at £30,000. Anything above the cap is taxed as earnings. PILON, holiday pay and bonus are always taxable as earnings and don’t use any of the allowance.
The taxable amount has a flat marginal rate applied based on the tax band you select. Basic rate: 20% income tax + 8% NI. Higher: 40% + 2%. Additional: 45% + 2%. This is rougher than a proper bands-aware calculation; real payroll uses your tax code and may produce a different figure.
Worked example
Sarah is being made redundant. Statutory redundancy: £7,500. Ex-gratia: £5,000. PILON: £7,200. Holiday: £1,200. No bonus. She’s a basic-rate taxpayer. Tax-free portion: £12,500 (statutory + ex-gratia, well under the £30k cap). Taxable as earnings: £8,400 (PILON + holiday). Estimated tax: £8,400 × 28% = £2,352. Estimated net: £12,500 + £6,048 = £18,548 from a £20,900 gross package.
The PENP rule for PILON
Post-Employment Notice Pay rules introduced by HMRC in April 2018 mean all PILON is taxable as earnings, regardless of how the contract describes it. The £30,000 allowance is reserved for genuine termination payments (statutory redundancy and ex-gratia) only. See redundancy pay tax explained for the full detail.
What this estimator doesn’t model
The personal allowance taper above £100k (currently reducing your tax-free personal allowance by £1 for every £2 of income above £100k). The NI band split at £50,270. Pension contributions and salary sacrifice arrangements. Student loan repayments. Scottish income tax bands. Treatments specific to share schemes or long-term incentive plans. For senior or complex packages, talk to a chartered accountant.
Related calculators and guides
- Redundancy pay calculator
- Settlement agreement calculator
- PILON calculator
- Final pay estimator
- Redundancy pay tax explained
- What is a settlement agreement?
- Financial planning hub
Frequently asked questions
- How much tax do I pay on redundancy in the UK?
- Statutory redundancy and any ex-gratia amount are tax-free up to a combined £30,000. Anything above £30,000 is taxed as earnings. PILON and holiday pay are always fully taxable as earnings, regardless of the size of the rest of the package. Tax rates depend on your tax band (basic, higher, additional).
- Is the first £30,000 of redundancy pay always tax-free?
- Yes, but only for statutory redundancy and ex-gratia amounts combined. PILON, holiday pay and contractual bonus don't share the allowance. So a £40,000 package made up of £8,000 statutory + £7,000 PILON + £25,000 ex-gratia would have £30,000 tax-free (the statutory plus £22,000 of the ex-gratia) and £10,000 taxed as earnings.
- Is PILON tax-free?
- No. Since the Finance Act 2018, all PILON is fully taxable as earnings under PAYE plus National Insurance. The £30,000 tax-free allowance doesn't apply to PILON. It's been this way for several years now; older guidance suggesting otherwise is out of date.
- Will I get a tax refund after redundancy?
- Possibly. The redundancy lump sum can push you into a higher tax band for the month it's paid, but your annual tax position usually reconciles via your tax code or self-assessment. If you don't immediately find new work at the same salary, you may have overpaid; HMRC's personal tax account shows the position.
Illustrative estimate, not tax advice. For your specific tax position, contact a chartered accountant or HMRC.