Redundancy Pay Calculator 2026/27

Redundancy Pay Calculator

✓ Verified for 2026/27

Service Details

£
Statutory Redundancy
£0
statutory payout
Redundancy Weeks
0
weeks of pay
Weekly Capped Rate
£0
statutory cap
Tax-Free Amount
£0
tax exemption threshold

Statutory Breakdown

Actual Weekly Salary £0
Capped Service Years 0
Tax-Free Redundancy £0
Taxable Redundancy £0
Total Redundancy Pay £0
Tax-Free 0%
Taxable 0%
ℹ️ Under UK statutory redundancy rules, the weekly pay is capped at £700 and the maximum length of service is 20 years. Your redundancy payment is calculated as: 0.5 week's pay for each full year you were under 22, 1 week's pay for each full year you were 22 to 40, and 1.5 week's pay for each full year you were 41 or older. The first £30,000 of redundancy pay is completely tax-free.
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Verified for Accuracy (2026/27 Tax Year)
Fact-checked and audited by David Vance, CTA FCA, Chartered Tax Advisor & Accountant. Verified against official HMRC rules.

How We Calculated This

  1. Input variables: Enter the relevant amounts, rates, or percentages in the form.
  2. Real-time breakdown: The calculator applies HMRC rules and thresholds for the 2026/27 tax year to process the values.
  3. Display outputs: The visual graphs, donut charts, and tables are compiled dynamically to show your net take-home and deductions.

Real-World Examples

Standard Scenario

A basic calculation applying standard UK tax bands and allowances.

Calculation runs based on standard HMRC rules.
With Pension or Deductions

Factoring in a percentage of salary sacrifice or pension contributions.

Deductions are calculated and adjusted accordingly.

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Frequently Asked Questions & Detailed Tax Guide

How is redundancy pay taxed in the UK?

In the UK, the tax treatment of redundancy packages depends on the type of payment. Under HMRC rules, the first **£30,000** of qualifying redundancy pay is completely exempt from Income Tax and National Insurance contributions. Any redundancy pay exceeding £30,000 is subject to Income Tax at your marginal rate (20%, 40%, or 45%) but is completely exempt from employee National Insurance. Note that non-redundancy payments, such as outstanding holiday pay or PILON (Payment in Lieu of Notice), are fully taxable from the first pound.

What is Statutory Redundancy Pay?

Statutory redundancy pay is the legal minimum your employer must pay if you have been employed for 2 years or more. It is calculated based on your age and length of service:
– 0.5 week’s pay for each full year you were under 22.
– 1 week’s pay for each full year you were 22 or older but under 41.
– 1.5 week’s pay for each full year you were 41 or older.
– Weekly pay is capped at £700 and length of service is capped at 20 years.

Step-by-Step Mathematical Calculation: Redundancy Package Tax

Let’s calculate the total tax deductions on a redundancy package of £45,000, which includes £5,000 of outstanding holiday pay, £10,000 of Payment in Lieu of Notice (PILON), and £30,000 of genuine redundancy compensation for a higher-rate (40%) taxpayer:

  • 1. Separate the Payments:
    – Non-qualifying pay (Holiday + PILON): £5,000 + £10,000 = £15,000.
    – Qualifying redundancy pay: £30,000.
  • 2. Assess Tax on Non-qualifying Pay (£15,000):
    – Income Tax at 40%: £15,000 * 40% = £6,000.00.
    – National Insurance at 2%: £15,000 * 2% = £300.00.
    – Total deductions on this portion: £6,300.00.
  • 3. Assess Tax on Redundancy Pay (£30,000):
    – The first £30,000 of genuine redundancy pay is 100% tax-free. Tax due: £0.00.
  • 4. Total Deductions on the £45,000 Package: £6,300.00.
  • 5. Net Cash Received: £45,000 – £6,300.00 = **£38,700.00**.

Tax Expert Pro-Tips: Redundancy Salary Sacrifice

David Vance, CTA FCA, recommends: “If your redundancy package exceeds £30,000, you will pay income tax on the excess. To avoid this tax, ask your employer if they will allow you to sacrifice the taxable excess directly into your pension scheme. This redundancy sacrifice avoids all income tax, allowing 100% of the excess to grow tax-free in your pension pot.”

Legislative References

  • Income Tax (Earnings and Pensions) Act 2003 (Section 401-416) – Specifies the £30,000 threshold and tax treatments for termination payments.
  • Employment Rights Act 1996 (Part XI) – Statutory redundancy framework.