Redundancy – guidance for
employees
If you are an employee who is being made redundant, your employer must tell
you how any statutory redundancy payment they pay you has been calculated.
You can also seek advice from any HM Revenue & Customs (HMRC) office.
To find out more follow the links below.
Redundancy
– information for employees on the Directgov website (Opens new window)
Download HMRC’s employee
factsheet on redundancy (PDF 149K)
Frequently asked questions
Note that the links below beginning ‘EIM’ will take you to relevant
pages in the Employment Income Manual. Those starting ‘NIM’ will
take you to relevant pages in the National Insurance Income Manual.
How much statutory redundancy pay is an employee entitled to?
You’ll find a Statutory Redundancy Payments calculator on the Business
Link website. Use
the Business Link Statutory Redundancy Pay calculator. (Opens new window)
How are the different parts of a redundancy package dealt with for tax and
National Insurance contributions purposes?
- Unpaid salary and holiday pay are earnings for tax and National Insurance
contributions.
- Redundancy payments are tax-free up to £30,000 (see
EIM13750) and not liable for National Insurance contributions (see
NIM02580). Note that in some situations the £30,000 is reduced
(see EIM13530).
- For payments in lieu of notice the position can be complex (see
EIM12975-9). The National Insurance contributions position follows that
for tax.
- Payments for restrictive covenants are earnings for tax and National
Insurance contributions purposes (see EIM03600.
& NIM02320).
- Damages payments are dealt with in the same way as redundancy payments
(see EIM13070).
Is £30,000 of a redundancy payment always tax exempt?
- Not always because certain payments must be added together before applying
the exemption (see
EIM13530).
