Is Redundancy Pay Taxable in the UK?

The £30,000 tax-free limit

Payments for losing your job, including statutory redundancy pay and any enhanced redundancy pay from your employer, are usually tax-free up to a total of £30,000. Anything above £30,000 is taxed as earnings.

The statutory maximum is £22,530, so most statutory redundancy pay falls within the tax-free limit. Enhanced payments from your employer count towards the same £30,000 limit, so a generous package can go over it.

What is taxed as normal pay

• Wages and salary up to your last day of work.
• Notice pay or pay in lieu of notice if your contract provides for it, or if it is paid for working your notice period.
• Accrued holiday pay that you have not taken.
• Bonuses and commission you have earned.

These are added to your final pay and taxed through payroll in the normal way. This is why your last payslip can show more tax than you expected, even when the redundancy element itself is tax-free.

How it works in practice

Your employer should tell you which parts of your final payment are taxable and which are not. They will pay the tax-free part without deducting tax, and deduct tax on the rest. If your payment is over £30,000, they should deduct tax on the excess.

Check what you are owed first

Work out your statutory minimum with our redundancy pay calculator, then check your contract for any enhanced redundancy terms. If you think you have been underpaid, contact Acas for free advice. If you have paid too much tax, you can ask HMRC for a refund.

This guide is general information, not financial or legal advice. Rates checked 8 October 2026 against GOV.UK.