Answers · UK 2025/26
Is redundancy pay above £30,000 taxable in the UK?
Yes. The first £30,000 of genuine redundancy pay is tax-free (combining statutory and any enhanced payment). Any amount above £30,000 is subject to income tax. National Insurance also applies above £30,000 since April 2020. Payment in lieu of notice (PILON) is always fully taxable.
Full answer
Redundancy pay tax treatment in the UK depends on the nature of the payment and how much you receive. The £30,000 tax-free limit: - The first £30,000 of a genuine redundancy payment is exempt from income tax. - This covers the combined total of statutory redundancy pay and any enhanced redundancy payment your employer offers. - Statutory Redundancy Pay alone is usually well under £30,000 (maximum for 2026: £21,000 based on 30 weeks x maximum week's pay of £700). Above £30,000: - Income tax applies on any redundancy payment exceeding £30,000. - The excess is added to your other income for the year and taxed at your marginal rate (20%, 40%, or 45%). - Employer National Insurance (Class 1A NI) at 13.8% also applies on the excess above £30,000 (introduced April 2020). - Employee NI does NOT apply to redundancy payments. What is always fully taxable: - Payment in lieu of notice (PILON): treated as employment income regardless of how it is described, taxable and NI-able in full since April 2018. - Compensation for holiday pay accrued but not taken: taxable as pay. - Bonuses or commission paid at redundancy: taxable as earnings. - Garden leave payments: taxable as earnings. What is always tax-free (separate from the £30,000): - Any payment for injury to feelings arising from discrimination. - Some payments for injury to health (non-contractual, non-employment related). Reporting and timing: - Your employer should deduct tax on the excess above £30,000 via PAYE. - If your total redundancy package affects your tax code or Self Assessment position, check your P60 and P45 carefully.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.