Tax on a lump sum when you leave

Statutory redundancy (the minimum set by law) is tax-free. Other payments when a job ends can be partly tax-free. The rest is taxed as pay.

Statutory redundancy pay is tax-free. Other lump sums your employer chooses to pay when you leave (ex gratia payments) can be partly tax-free. The tax-free part is the highest of the basic exemption, the increased exemption or the Standard Capital Superannuation Benefit. That last one is based on your pay and years of service. Anything above it is taxed through payroll. Holiday pay, and pay instead of working your notice, are taxed as ordinary pay.

Work it out

• Redundancy pay and tax →

Terms: Termination payment

All payslip topics · General information, not tax advice.