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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

1 · Location and tax position

Chooses the statutory weekly-pay cap. It does not choose your Income Tax bands.

Exclude every package item entered below. Savings and dividends use separate rules and are not modelled.

2 · Indicative statutory pay

Release 1 maintains only 2026/27 caps and tax rules. A disputed legal relevant date is outside this estimate.

Use the statutory 12-week measure supplied or checked by your employer; this tool does not rebuild irregular pay history.

3 · Employer package

Ordinary earnings: Income Tax and employee Class 1 NI.

Ordinary earnings: it does not use the £30,000 threshold.

Ordinary earnings when paid for work.

Already treated as earnings. In the advanced PENP formula, only qualifying taxable PILON belongs in T.

PENP is carved out of this relevant termination award; it is not added on top.

Include connected or earlier qualifying termination awards that reduce the threshold available now.

4 · Post-employment notice pay (PENP)

Use the amount identified in the employer's written tax breakdown. It is capped at the enhanced award entered above.

Optional employer quote audit

Enter 0 to omit. PAYE may differ from the full-year tax estimate.

Enter 0 to omit.

Enter 0 to omit. A difference is a reconciliation question, not proof of an error.

Estimated net package
£44,907
From a £53,767 entered package after estimated full-year Income Tax and employee NI on the selected final-pay period.
Statutory redundancy
£12,767
Within £30,000 threshold
£30,000
PENP treated as earnings
£6,000
Incremental Income Tax
£8,453
Extra NI from PILON/PENP
£120
£26.9k£53.8kGross package £53,767 split into £44,907 estimated net cash, £8,453 Income Tax and £408 employee NIGross package £53,767 split into £44,907 estimated net cash, £8,453 Income Tax and £408 employee NIGross package £53,767 split into £44,907 estimated net cash, £8,453 Income Tax and £408 employee NIPackage
Estimated net cashIncremental Income TaxEmployee NI
Other ordinary earnings: £6,000PENP: £6,000Qualifying award inside threshold: £30,000Taxable qualifying-award excess: £11,767
Other ordinary earningsPENPQualifying award inside thresholdTaxable qualifying-award excess
5.5 wk11 wk11 complete service years × 1 weeks = 11 weeks4 complete service years × 1.5 weeks = 6 weeksUnder 2222–4041+
Under 22: 0.5 week per yearAge 22–40: 1 week per yearAge 41+: 1.5 weeks per year
Statutory entitlement audit
ItemYearsWeeksValue
Under 2200£0
Age 22–401111£8,261
Age 41+46£4,506
Totals used1517£12,767

Entered weekly pay £900; £751 cap applied; 0 complete service years excluded by the 20-year limit.

Package classification
ComponentEntered / usedIncome Tax treatmentEmployee NI
Wages£4,000EarningsClass 1
Holiday pay£2,000EarningsClass 1
PENP carved from enhanced award£6,000EarningsClass 1
Qualifying award inside threshold£30,000Normally tax freeNo employee NI
Qualifying-award excess£11,767Income TaxNo employee NI
Tax, NI and quote reconciliation
Audit itemBefore / baselineAfter / modelDifference
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
Independent support

MoneyHelper redundancy guide

Review statutory pay, notice, contractual packages and free support routes outside this calculation.
Separate pension decision

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:

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.