Statutory and contractual redundancy pay come with a genuinely useful tax break — but only up to a point, and it’s worth understanding exactly where that point is.
The £30,000 threshold
The first £30,000 of a genuine redundancy payment is entirely free of Income Tax and National Insurance. Anything above that is taxed as normal income.
What counts, and what doesn’t
This applies to compensation for loss of employment specifically — statutory redundancy pay, and any additional contractual payment genuinely tied to the redundancy itself. Payments for unused holiday, notice pay, or bonuses owed are taxed normally and don’t benefit from the £30,000 exemption, even if they’re paid in the same lump sum.
Working out your real take-home
If your total redundancy package includes both exempt and non-exempt elements, it’s worth having your employer break the figures down clearly — the tax treatment genuinely differs line by line.
Work out your own figures with the Payslp redundancy pay calculator.
How this interacts with your final payslip
Your final pay is often a mix of several elements — final salary, unused holiday, notice pay, and the redundancy payment itself. Only the genuine redundancy compensation element benefits from the £30,000 exemption; the rest is taxed as normal income, even though it may all arrive in a single lump sum on the same date.
Frequently asked questions
Does the £30,000 threshold apply per redundancy or per year?
Per redundancy event, not per tax year — if you’re made redundant more than once in your career, each qualifying payment gets its own £30,000 exemption.
Is Statutory Redundancy Pay itself always under £30,000?
Almost always, since it’s capped by age, length of service, and a maximum weekly amount — the exemption becomes more relevant when a more generous contractual payment is added on top.