Is redundancy pay taxable? Employment Law

In simple terms redundancy pay, including any severance pay, under £30,000 is tax-free.

However, the tax-free allowance only applies to payments made for termination, not payments made for earnings. This means that your notice pay is taxable in full.

The £30,000 exemption applies to compensation received for loss of your job.

If you receive a settlement agreement, this should set out clearly each element of your termination payment, how the amounts have been determined and the tax that those payments will be subject to.

For advice on redundancy or settlement agreements, email or call 01782 205000.