Answers · UK 2025/26
Is redundancy pay above £30,000 taxable?
Yes. The first £30,000 of a genuine redundancy payment is tax-free. Any amount above £30,000 is subject to income tax at your marginal rate, but not National Insurance.
Full answer
HMRC provides a £30,000 tax exemption for genuine redundancy payments in 2026/27 (this threshold has been unchanged since 1988). The tax-free £30,000 covers the statutory redundancy element and any additional ex-gratia payment made on termination of employment. The amount above £30,000 is added to your taxable income for the year and taxed at your marginal income tax rate (20%, 40%, or 45%) but is not subject to employee or employer National Insurance. Note that payments in lieu of notice (PILONs) are fully taxable as earnings (income tax and NI) regardless of the £30,000 threshold, following changes introduced in April 2018. Holiday pay and outstanding bonuses are also fully taxable. If a redundancy payment pushes you into a higher tax band, you may wish to consider making a pension contribution to offset the tax bill.
Try the calculator
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.