UK Redundancy Pay and Tax Calculator
Break an employer package into statutory pay, enhanced compensation, wages, holiday pay, bonus, PILON and PENP. See what may use the £30,000 threshold, what is treated as earnings and the estimated cash left after Income Tax and employee National Insurance.
Published by GrowThenDraw Editorial Team · Editorial policy · Methodology & sources
| Item | Years | Weeks | Value |
|---|---|---|---|
| Under 22 | 0 | 0 | £0 |
| Age 22–40 | 11 | 11 | £8,261 |
| Age 41+ | 4 | 6 | £4,506 |
| Totals used | 15 | 17 | £12,767 |
Entered weekly pay £900; £751 cap applied; 0 complete service years excluded by the 20-year limit.
| Component | Entered / used | Income Tax treatment | Employee NI |
|---|---|---|---|
| Wages | £4,000 | Earnings | Class 1 |
| Holiday pay | £2,000 | Earnings | Class 1 |
| PENP carved from enhanced award | £6,000 | Earnings | Class 1 |
| Qualifying award inside threshold | £30,000 | Normally tax free | No employee NI |
| Qualifying-award excess | £11,767 | Income Tax | No employee NI |
| Audit item | Before / baseline | After / model | Difference |
|---|---|---|---|
| Full-year taxable income | £45,000 | £68,767 | £23,767 |
| Full-year Income Tax | £6,486 | £14,939 | £8,453 |
| NI-able final-pay earnings | £6,000 | £12,000 | £6,000 |
| Employee NI | £287.50 | £407.50 | £120.00 |
MoneyHelper redundancy guide
Review statutory pay, notice, contractual packages and free support routes outside this calculation.
Pension tax relief
Only after checking advice and contribution limits, compare relief methods separately; this calculator does not assume a contribution is suitable.
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One redundancy package can contain three different tax treatments
Unpaid wages, holiday pay and bonuses are ordinary earnings. Contractual or customary PILON is also taxed as earnings, and HMRC can reclassify part of a relevant termination award as post-employment notice pay (PENP). Those amounts face Income Tax and employee Class 1 National Insurance rather than the termination-award exemption.
Statutory redundancy pay and the qualifying part of enhanced or ex-gratia compensation share one £30,000 Income Tax threshold. The employee does not pay National Insurance on the excess qualifying award, although the employer may owe Class 1A. This calculator keeps those buckets visible instead of applying one marginal rate to the whole cheque.
The statutory estimate works backwards year by year
Only complete service years count, and no more than the most recent 20. Each year is tested separately: half a week's pay while under 22, one week from age 22 through 40, and one and a half weeks from age 41. A current age multiplier applied to all service would be wrong.
For redundancies from 6 April 2026, Great Britain caps a week's pay at £751 and the ordinary maximum at £22,530. Northern Ireland currently uses £783 and £23,490. The result is indicative because the legal relevant date, employee status, continuity and 12-week pay measure can require facts this form does not collect.
PENP is a reclassification, not another payment
PENP can move part of an enhanced award into the earnings bucket. It must not be added on top of the gross employer package, and statutory redundancy pay itself is not the PENP cap. The default path accepts the employer's written PENP figure; the advanced path exposes BP, D, P and T exactly as HMRC describes them.
The 30.42 option is only for qualifying monthly-pay cases, while the whole-month shortcut requires equal monthly pay and whole contractual and unworked notice months. If those conditions do not fit, use the employer calculation or obtain professional help instead of forcing the package through a convenient preset.
Annual Income Tax and final-payslip PAYE are not the same number
GrowThenDraw compares final 2026/27 Income Tax before and after the taxable package using the selected UK or Scottish bands. An employer may deduct a different amount under the tax code, cumulative pay record or after-P45 rules. A later payroll or Self Assessment reconciliation can therefore differ from this annual-liability estimate.
Employee National Insurance is calculated separately for the selected weekly, four-weekly or monthly earnings period. The audit shows NI on all entered NI-able final-pay items and the extra NI caused by PILON and PENP. Directors, annual methods, other category letters and multiple employments are outside this release.
Frequently asked questions
Is the first £30,000 of every redundancy payment tax free?
No. The threshold normally applies to combined qualifying termination awards such as statutory redundancy and qualifying enhanced compensation. Wages, holiday pay, bonus, taxable PILON and PENP are earnings and do not use the £30,000 threshold. Earlier qualifying awards can also reduce what remains.
What is PENP in a redundancy package?
Post-employment notice pay is HMRC's calculation of basic notice pay not already taxed as PILON. It is treated as earnings for Income Tax and employee Class 1 NI and reduces the enhanced award left in the qualifying termination bucket.
Does statutory redundancy pay count as PENP?
No. PENP is capped by the relevant enhanced or ex-gratia termination award in this model. Statutory redundancy remains a qualifying award and shares the £30,000 threshold with the qualifying enhanced amount.
Why can the employer's tax deduction differ from this result?
This calculator estimates the package's incremental full-year 2026/27 Income Tax liability. Payroll must use the employee's tax code and pay history, and special after-P45 rules may apply. The optional quote fields show the difference but never label it as a guaranteed refund or amount due.
Are Scotland and Northern Ireland handled?
Yes, but they affect different parts. Scotland selects Scottish non-savings Income Tax bands. Northern Ireland uses rest-of-UK Income Tax bands but has its own current statutory weekly cap and maximum award. Choose statutory jurisdiction and Income Tax region separately.
Can I use this before signing a settlement agreement?
Use it to identify questions and reconcile the written package, not to decide whether an agreement is fair, lawful or suitable. Settlement terms, discrimination, consultation, notice disputes and tribunal deadlines need qualified employment-law advice.
UK redundancy, termination-payment, PENP and employee-NI rules verified 2026-09-18:
- GOV.UK: statutory redundancy pay and 2026 Great Britain limits
- Employment Rights (Increase of Limits) Order 2026
- nidirect: Northern Ireland redundancy pay
- GOV.UK: termination-payment components
- HMRC EIM13874: relevant termination awards
- HMRC EIM13880: PENP formula
- HMRC EIM13888: whole-month and 30.42 examples
- HMRC NIM02555: employee Class 1 NI on PENP
- HMRC: 2026/27 Class 1 rates and thresholds
- HMRC NIM01010: thresholds for non-weekly earnings periods
- GOV.UK: employer Class 1A above £30,000
Scope: an ordinary employee package in 2026/27; Great Britain or Northern Ireland statutory caps; England/Wales/Northern Ireland or Scottish non-savings Income Tax; one weekly, four-weekly or monthly category-A final-pay period; supplied normal weekly pay; employer-supplied or basic HMRC-formula PENP; and an optional employer-quote reconciliation.
Excludes entitlement disputes, employee-status and continuity exceptions, irregular weekly-pay reconstruction, limited-term-contract PENP, overseas and non-resident cases, death/injury/disability/legal-cost/pension/non-cash special treatment, insolvency claims, directors and other NI methods, tax codes and exact PAYE, student loans, benefits, savings/dividends, pension or Gift Aid relief, settlement advice and personalised legal, employment, tax, pension or financial advice.