Redundancy package after tax — what will you actually receive?

Reviewed: September 2026

If your employer has offered a redundancy package, the headline figure is rarely what reaches your bank account. Tax and National Insurance apply differently to redundancy compensation, PILON, holiday pay and wages.

Why the gross package is misleading

UK rules treat genuine redundancy and severance compensation differently from notice pay (PILON), holiday pay and wages. The first combined £30,000 of qualifying termination payments is generally not taxed; other components are usually taxed as earnings.

Source: GOV.UK — what you pay tax and NI on.

What to enter from your offer letter

• Redundancy or severance amount
• PILON / notice pay (if any)
• Holiday pay and other wages or bonus

You can get a quick estimate with just those figures, then add salary and year-to-date pay for a more personalised tax estimate.

Related: Redundancy + PILON calculator · Compare two offers

Examples

£25,000 package with £8,000 PILON

The £8,000 notice pay is usually taxed as earnings. Only qualifying redundancy compensation may use the £30,000 combined tax-free exemption.

£30,000 all labelled "redundancy"

If part of that is PILON or holiday pay, it may not all be tax-free. Split the lines from your letter before estimating.

Try the calculator with your figures →