Your package
Enter the taxable notice/PENP amount separately if you know it. This keeps the tax-free severance calculation cleaner.
Estimated net package received
£0
Gross package entered: £0
What this means
Statutory redundancy pay sits inside the general £30,000 tax-free termination-payment slice. Notice pay and holiday pay do not: they behave like normal taxable wages.
Worked examples — see the maths on real numbers
How statutory and enhanced redundancy payments are taxed in 2026/27, including the £30,000 tax-free threshold.
Owen — 8 years' service, age 40, £45,000 salary
| Years of service | 8 |
| Age bracket | 22-40 for all 8 years (1 week per year) |
| Statutory redundancy | 8 × £751 (capped weekly) = £6,008 |
| Enhanced redundancy from employer | £20,000 |
| PILON (pay in lieu of notice) | £3,750 |
| Earnings already received this tax year | £22,500 |
| Total payment | £29,758 |
The maths:
- PILON is taxed as earnings: £3,750 added to the £22,500 already earned, all within the basic-rate band
- Statutory + enhanced redundancy: £26,008 — entirely under the £30,000 threshold
- Tax-free element: £26,008
- Taxable element of redundancy: £0
- Tax on the PILON: £3,750 × 20% = £750; employee National Insurance: £3,750 × 8% = £300
Result: Owen keeps £28,708 of his £29,758 total payment. Only the PILON is taxed, and it is the only part that attracts National Insurance; statutory and enhanced redundancy under the £30,000 threshold are tax-free.
Helen — 15 years' service, age 56, £75,000 salary
| Years of service | 15 |
| Statutory redundancy (all 15 years aged 41 or over, 1.5 weeks a year) | 15 × 1.5 × £751 = £16,898 |
| Enhanced redundancy from employer | £35,000 |
| PILON | £12,500 |
| Earnings already received this tax year | £37,500 |
| Total redundancy package | £64,398 |
The maths:
- PILON taxed as earnings: it takes her income from £37,500 to £50,000, all within the basic-rate band, so £12,500 × 20% = £2,500 tax plus £12,500 × 8% = £1,000 employee National Insurance
- Total redundancy element: £51,898 (£16,898 + £35,000)
- Tax-free £30,000 threshold applied
- Taxable redundancy: £51,898 − £30,000 = £21,898, taxed as income but with no employee National Insurance
- Tax on it: £270 × 20% = £54 to the end of the basic-rate band, then £21,628 × 40% = £8,651, so £8,705
Result: Helen pays £11,205 in tax and £1,000 in National Insurance on her £64,398 package, keeping about £52,193. Termination money the employer pays into a registered pension scheme is not taxed unless it takes her over the annual allowance, so whether part of a large package can go into a pension is a question for the employer before the agreement is signed.
Figures use 2026/27 UK tax-year rates and thresholds. Always verify against your specific payslip or tax statement before acting.
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