UK redundancy guide · reviewed 23 September 2026

How much redundancy pay will I actually get after tax?

The headline figure in a redundancy letter is rarely the same thing as the money that lands in your account. The useful question is what each part of the package actually is.

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Short answer

Qualifying statutory redundancy pay and additional severance or enhanced redundancy payments can usually share a £30,000 tax-free allowance. PILON, wages, holiday pay and bonuses are treated differently and are normally taxed as earnings.

Start by splitting the package into components

Do not apply one tax percentage to the whole package. A redundancy settlement can contain several payments with different tax treatment.

Typical components include statutory or enhanced redundancy pay, payment in lieu of notice (PILON), holiday pay, salary or arrears, bonus payments and sometimes benefits or pension contributions.

Qualifying redundancy or severance payments may use the combined £30,000 tax-free allowance.
PILON, holiday pay, wages and bonuses are normally subject to Income Tax and National Insurance.
The timing of payroll and your wider income for the tax year can affect what is deducted initially.

Why the net figure can feel surprisingly low

A large gross package can include a lot of ordinary earnings. If several taxable components arrive in one payroll period, PAYE can also make the first deduction look severe.

That does not mean every pound of the package has been taxed in the same way. It means the components need to be modelled separately before you judge what the offer is worth.

What DunDunSee models

DunDunSee lets you separate enhanced or ex-gratia redundancy, PILON, garden leave, holiday pay, bonus and other package components before estimating take-home and runway.

It is an estimator, not your employer's payroll. Your final payslip, P45 and employer calculation remain the authoritative figures.

This guide explains the general position and is designed to help you ask better questions about a redundancy offer. Contract terms, payroll treatment and individual circumstances can change the outcome.

Turn the package into a number you can use

DunDunSee™ separates the moving parts of a redundancy package, estimates take-home and helps translate it into financial runway.

Open DunDunSee™

Official sources

GOV.UK: Tax on termination paymentsOfficial explanation of taxable termination payments and the combined £30,000 allowance.GOV.UK: What a termination payment isOfficial overview of the components that can appear in a termination payment.