How Much Tax Will I Pay on £60,000 Redundancy

Losing your job can be stressful, but understanding how redundancy pay is taxed in the UK can make things easier. If you’re wondering, “How much tax will I pay on 60,000 redundancy?”, this guide breaks it all down clearly — from tax-free allowances to what happens with PAYE and National Insurance.

What Is Redundancy Pay and When Do You Get It?

Redundancy pay is money your employer gives you if your role no longer exists. It acts as a financial cushion while you look for a new job. There are two main types of redundancy pay:

• Statutory redundancy pay: This is the minimum payment set by UK law. It’s based on your age, weekly pay (up to a government-set limit), and how long you’ve worked for your employer.

• Enhanced (or contractual) redundancy pay: Some employers offer a better deal through your employment contract or a company redundancy policy.

You usually qualify for redundancy pay if:

• You’ve worked for your employer for two years or more.

• You’re classed as an employee (not self-employed or a contractor).

• You’re being made redundant (not dismissed for misconduct or resignation).

Knowing the type of redundancy pay you’re entitled to is the first step to understanding how much of it will be tax-free and how much you’ll pay in tax.

How Is Redundancy Pay Taxed in the UK?

According to HMRC’s redundancy tax guidance (Income Tax (Earnings and Pensions) Act 2003, section 403), the first £30,000 of redundancy pay is completely tax-free. This applies whether your redundancy is statutory or enhanced.

However, anything over £30,000 becomes taxable income. HMRC treats it just like normal pay — meaning it’s subject to income tax but not National Insurance.

Do You Pay National Insurance on Redundancy Pay?

No, redundancy pay itself is not subject to National Insurance contributions (NICs). This is because HMRC classifies it as a termination payment, not earnings from active employment.

But here’s where many people get confused — other payments made at the same time as redundancy are subject to tax and NICs. These include:

• Pay in lieu of notice (PILON) – if you’re paid instead of working your notice period, that’s taxed as normal pay.

• Accrued holiday pay – any unused leave is treated as regular salary.

• Bonuses or commission – taxed just like ordinary earnings.

How Much Tax Will I Pay on £60,000 Redundancy in 2025?

Let’s look at an example of how much tax you might pay if you receive a £60,000 redundancy package in the UK.

If you’re being made redundant in the 2025/26 tax year and receive £60,000, here’s how HMRC would typically apply tax:

• Total redundancy pay: £60,000

• Tax-free portion: £30,000

• Taxable portion: £30,000

• Tax year: 2025/26

Assuming you have no other income after redundancy (to keep it simple):

So, in this simplified example, if you received £60,000 in redundancy pay, you’d take home around £56,514 after tax.

If you’re earning additional income (for example, wages from a new job in the same tax year), the taxable £30,000 could push you into a higher tax band, meaning more tax may be due.

What If I Receive Other Payments Alongside Redundancy Pay?

You might get several different types of payments when you leave a job. Not all are treated the same way by HMRC.

This breakdown shows why it’s important to understand each element of your final payment — not just the redundancy lump sum.

Can I Reduce the Tax I Pay on Redundancy Money?

You can’t escape tax on redundancy pay above £30,000, but you can use legitimate strategies to make your payout more tax-efficient.

1. Use Your Pension Allowance

You can ask your employer to pay part of your redundancy money directly into your workplace pension as an employer contribution. This reduces your taxable income while boosting your retirement savings.

For example, if £10,000 of your taxable redundancy pay is paid into your pension, you may save up to £2,000 in tax depending on your income bracket.

2. Spread Payments Across Tax Years

If your employer agrees, ask to receive part of your redundancy pay after 6 April, when the new tax year begins. This can stop you from being pushed into a higher tax band if you’ve already earned a salary earlier in the year.

3. Claim a Tax Refund

If you don’t work again for several months after redundancy, you might have overpaid tax under PAYE. You can reclaim this using HMRC’s P50 form or the online tax refund tool. Many people are surprised by how much they can get back — sometimes hundreds of pounds.

How Does HMRC Collect Tax on Redundancy Pay?

For most employees, tax on redundancy pay is deducted at source via PAYE (Pay As You Earn).

• Your employer uses your P45 tax code to work out how much to withhold.

• If you receive the payment after you’ve already left and no tax code is available, emergency tax may be applied.

• You can later reclaim any overpaid tax through HMRC’s online service.

What Happens If I’m Made Redundant Again?

If you’re unfortunately made redundant again later in your career, HMRC treats it as a separate redundancy event. That means you get a new £30,000 tax-free limit each time, as long as it’s a genuine redundancy and not part of the same employment contract.

This ensures fair treatment for people who might face multiple redundancies during their working life.

What Are the Common Mistakes People Make About Redundancy Tax?

• Assuming the whole amount is tax-free. Only the first £30,000 qualifies.

• Not checking the payslip. Mistakes can occur if employers misclassify payments.

• Ignoring pension options. Salary sacrifice into a pension can be tax-efficient.

• Forgetting to claim refunds. Especially if you don’t work again that tax year.

Conclusion

If you’re made redundant in the UK and receive £60,000, the first £30,000 is tax-free. The remaining £30,000 is taxed based on your income tax band. For many, that means paying around £3,500 in tax, leaving roughly £56,500 in hand.

Understanding how redundancy pay is taxed helps you plan better, avoid overpaying, and make the most of tax-efficient options like pension contributions.

FAQs

1. How much tax do you pay after £60,000?

You’ll usually pay tax on the £30,000 above the tax-free limit, which is around £3,500 in basic-rate tax for most people.

2. How do I calculate redundancy pay?

Multiply your years of service by your weekly pay (capped at £700 for 2025), and adjust based on your age band using the UK statutory formula.

3. Tax on redundancy payments over £30,000 UK calculator

Use HMRC’s online redundancy tax calculator to see how much of your payment will be taxed after the £30,000 exemption.

4. Avoiding tax on redundancy payments

You can’t avoid it entirely, but you can reduce tax by paying into a pension, delaying payment to a new tax year, or reclaiming overpaid tax.

5. How to avoid the 60% tax trap?

Avoid the 60% effective rate by contributing to a pension or using salary sacrifice to bring your taxable income below the £100,000 threshold.