£45,000 Redundancy: Tax in Scotland vs England in 2026/27

The £30,000 Rule, and What Happens Above It

Redundancy is stressful enough without an unexpected tax bill. The good news is that the first £30,000 of a genuine redundancy payment is completely tax-free and NIC-free, wherever in the UK you live. This is a reserved rule set by HMRC and does not vary between Scotland and the rest of the UK.

The complication starts above £30,000. Any amount over that threshold is treated as ordinary taxable income, added to whatever other income you received in that tax year, and taxed at your marginal rate. Because Scotland and the rest of the UK use different income tax bands, the same £45,000 redundancy payment can produce a different tax bill depending on where you live — and depending on how much other income you had that year.

Scenario A: £20,000 Other Income, £45,000 Redundancy

Suppose a worker earned £20,000 in salary before being made redundant, then received a £45,000 redundancy payment. The taxable excess is £45,000 − £30,000 = £15,000, which is added on top of the £20,000 already earned, taking total taxable income for the year to £35,000.

rUK tax on the £15,000 excess: Since £20,000 + £15,000 = £35,000 stays entirely within the 20% basic rate band (which runs to £50,270), the whole excess is taxed at 20%.

£15,000 × 20% = £3,000.00

Scottish tax on the £15,000 excess: Starting from £20,000 of other income (already within the Scottish basic band of £15,397–£27,491), the £15,000 excess pushes the taxpayer through the rest of the basic band, all of the intermediate band, and into the higher band:

• Remaining basic band: £27,491 − £20,000 = £7,491 × 20% = £1,498.20
• Intermediate band: £31,092 − £27,491 = £3,601 × 21% = £756.21
• Higher band: £35,000 − £31,092 = £3,908 × 42% = £1,641.36
• Total tax on the excess: £3,895.77

Gap: £895.77 more tax paid in Scotland, purely because the excess crosses three separate Scottish bands (basic, intermediate, higher) instead of staying within a single rUK band.

Scenario B: £55,000 Other Income, £45,000 Redundancy

Now consider a higher earner who had already earned £55,000 in the tax year before redundancy, then received the same £45,000 payment. The taxable excess of £15,000 takes total income from £55,000 to £70,000.

rUK tax on the excess: £55,000 is already above the £50,270 higher-rate threshold, so the entire £15,000 excess is taxed at 40%.

£15,000 × 40% = £6,000.00

Scottish tax on the excess: £55,000 sits within the Scottish 42% higher band (£31,092–£62,430). Adding £15,000 takes total income to £70,000, which crosses into the 45% advanced band at £62,430:

• Higher band portion: £62,430 − £55,000 = £7,430 × 42% = £3,120.60
• Advanced band portion: £70,000 − £62,430 = £7,570 × 45% = £3,406.50
• Total tax on the excess: £6,527.10

Gap: £527.10 more tax paid in Scotland — smaller in percentage terms than Scenario A, because the marginal rate difference here (42%/45% vs 40%) is narrower than the gap between Scotland's 20-42% band-crossing and rUK's flat 20% in Scenario A.

National Insurance: The Same Everywhere, and Not Charged to You

It's worth being explicit about National Insurance, since it's a common point of confusion. Since April 2020, employers pay Class 1A National Insurance on the portion of a termination payment above £30,000 — but this is an employer cost, calculated and paid by the employer to HMRC, and does not appear as a deduction from the employee's payment. As an employee receiving redundancy pay, you will never see employee National Insurance deducted from any part of a qualifying redundancy payment, in Scotland or anywhere else in the UK.

Summary: Both Scenarios Side by Side

Practical Steps If You're Facing Redundancy

1. Confirm with your employer or HR exactly how your payment is broken down — only genuine redundancy/termination compensation qualifies for the £30,000 exemption; PILON, holiday pay, and bonuses due are all fully taxable as normal earnings.
2. Work out your total income for the specific tax year the payment falls in, since this determines which bands the taxable excess lands in — timing the payment (if you have any control) can materially change the tax outcome.
3. Ask whether your employer will allow some or all of the taxable excess to be paid into a pension instead of as cash — this can avoid income tax on that portion entirely, subject to your available annual allowance.
4. Use a proper income tax calculator for your country of residence to check the exact tax on the excess rather than assuming a flat percentage, since — as shown above — the excess can straddle multiple bands.