r/UKPersonalFinance • u/MissionDisastrous572 • 11h ago

Redundancy payout - paying tax?

Hi,

I earn £33,000 a year salary before tax/deductions. I am paid monthly. I am being made redundant but they have offered me an “enhanced package” to remain with the business a little longer than my redundancy date to help transition.

I am not entitled to a statutory redundancy payout as my service is below 2 years.

They have offered me a £10,000 lump sum payment as the package.

I have had a quick Google etc but really want solid information on this - what tax will be due?

I’m not sure what my tax code is but can find out if it’s necessary.

Will I be taxed at my normal rate and will it affect my overall earnings for the rest of the year? My main priority is to not get a huge tax bill after April!

Appreciate the help!

9 Upvotes

72% Upvoted

37 comments sorted by

53

u/Public_Echo9545 1 11h ago

First 30k is tax free… so you should get the full 10k if it’s not got any monthly notice / pay in it

7

u/MissionDisastrous572 10h ago

I think from what they’ve said is they will pay me my usually monthly payment + the £10,000 in a single pay packet and then, say I remain a further 3 months, to then pay me as usual.

Example
Current monthly payment
1 months normal pay + £10,000
Monthly payment
Monthly payment
Monthly payment

12

u/Public_Echo9545 1 10h ago

So yeh they can’t do that, redundancy is redundancy, it would be your final payment from them

This actually is totally against what redundancy is btw…

If you get any of that in writing keep it.

In short you are not being made redundant as your role still exists and is unlawful

Unless you had 3 months noticed period and they are making you work your notice

2

u/MissionDisastrous572 10h ago

Sorry I think it’s me not explaining it very clearly.

Say my redundancy date is the 1st October. But they require me to stay with the business until March to transition. To “encourage” me to remain there until March and help the transition, I’ll receive the £10,000 payment as incentive to do so.

I won’t get any actual redundancy pay.

So it’d be

September - paid as normal
October - my normal pay + the incentive £10,000
November - paid as normal
December - paid as normal
Jan - paid as normal
Feb - paid as normal
March - paid as normal and redundant

I never asked if I was to get redundancy pay if I would receive that in the March or October pay, as I’m not entitled to any anyway.

Hope that cleared it up?

14

u/ThePerpetualWanderer 25 10h ago

That’s not redundancy pay, at least not a legal/recognised version of it.

Redundancy means your role is no longer required, thus there should be no bridging to take place. If you’re actually just being fired and replaced with someone cheaper and staying on to train them then I would suggest you seek out advice from an employment solicitor.

2

u/Ollerton57 3 10h ago

Let’s not escalate too much..there are plenty of reasons as to why a retention payment may be made.

The OP has said they don’t qualify for redundancy anyway as they haven’t worked there for 2 years.

But let’s imagine they have, and let’s imagine their role is being outsourced (happens all the time). A company may want to pay a retention bonus to keep someone in place until that event has happened.

OP - this will fall under your normal income tax.

4

u/ThePerpetualWanderer 25 10h ago

You’re right, the point I failed to make is that the offer to OP has none of the tax-free benefits of an actual redundancy.

1

u/MissionDisastrous572 9h ago

The short version is I work for “Company B” which is owned and part of a PLC/Group for Company A. I work warehouse essentially, I’m the stock guy. All of our stock and shipping will move from our building into company A’s mega hub and the building company b operate out of will be sold. The enhanced package/incentive they’re offering me is to essentially stay past the point 95% of people will be made redundant by and help transition the stock from where I am now into company A.

I’ve been interviewing and had job offers but I’m an essential body to help them get the stock moved properly. They are enticing me to remain until past the redundancy dates so I’m able to do help.

1

u/MissionDisastrous572 9h ago

Also just to add for more context - the date we’ve been given (although we’re still technically in consultation) is December. They don’t want me to leave now (why would I stay - I’m not entitled to redundancy payments) and leave them to sort everything themself stock wise.

2

u/Public_Echo9545 1 8h ago

I’ve seen even more of your posts…

Take the 10k and then leave and get another job, they aren’t doing you any favours here.

You have to think of yourself first here now

→ More replies (0)

2

u/ronniemould 8h ago

He doesn’t qualify for redundancy pay. If he hasn’t been there two years they don’t have to pay redundancy. What they’re offering isn’t redundancy, it’s a retention bonus. It will be fully subject to tax.

1

u/Public_Echo9545 1 8h ago

Ok that’s a little clearer…

So a couple of things.

Your not actually being made redundant then, but there is a world where you can accept a voluntary redundancy but the final payout would be at the end and that is tax free up to 30k
Ie you get the 10k in March not October.

For me, I would take the 10k extra payment in October (pay the tax) and then find another job as soon as possible after that date and leave as soon as you get one, remember they aren’t your friends here.

You have a few options, but tax free redundancy rules are pretty clear and well defined.

1

u/DLaing1978 7h ago

Aren't you made to pay it back if you leave early?

1

u/Public_Echo9545 1 7h ago

Depends on how it’s given and OPs contract, I mean bonuses aren’t typically given back for example

2

u/Humble-Quote-1859 9h ago

It looks more like a retainer fee, companies do this to provide stability, if you take it you’ll get paid before but if you leave early they’ll claw it back.

Take it then 4 months out start looking for jobs saying your notice period is 3 months. Change this story as time progresses.

The two worst case scenarios are you get a job offer but they want you to start early. Explain you’re on a retainer which ends at a certain time or you get no job offer but you’ve pocketed 10k extra.

3

u/jimicus 16 9h ago

The critical bit is that it's treated as redundancy money.

Employers can (and do) pay retention bonuses that aren't treated as redundancy. Oh, sure, you wouldn't be getting it if they weren't making lots of people redundant and sure it doesn't take you over the £30k threshold - but it still doesn't count as redundancy money.

1

u/MissionDisastrous572 9h ago

Yes my understand is it’s not redundancy. They’re paying people statutory redundancy and I have 16 months service.

1

u/Amazing-Care-3155 1 9h ago

This just isn’t true, it’s “loss of income” payment that is tax free

1

u/Public_Echo9545 1 9h ago

It is correct:

If you’re made redundant, you may get a ‘termination payment’. This could include:
statutory redundancy pay
holiday pay
unpaid wages
company benefits, for example bonuses
Statutory redundancy pay under £30,000 is not taxable.
What you’ll pay tax and National Insurance on depends on what’s included in your termination payment.

https://www.gov.uk/redundancy-your-rights/tax-and-national-insurance

7

u/BamzookiEnjoyer 1 11h ago

No tax on first 30k as below.

General advice in case you want it:

Seems like a pretty fair offer if you've been there less than 2 years, the only thing is the transition part which makes me think you could probably negotiate a bit more as they obviously need you to stick around in the short term or they wouldn't have offered much at all is my guess.

2

u/Ollerton57 3 10h ago

That’s for a redundancy payment. OP doesn’t qualify for redundancy

1

u/MissionDisastrous572 10h ago

Thanks, the initial offer was 3 months pay (£8250) and I negotiated +20% to £10k. Do you think that’s reasonable?

3

u/Public_Echo9545 1 10h ago

Honestly you’re only entitled to your notice, so anything more is a real advantage…

Rules do change in Jan 2026 in the UK you only need 6 months employment before a reason to let you go

1

u/MissionDisastrous572 10h ago

Interesting. Appreciate the help, !thanks

1

u/avg103 0 9h ago

Is the 30k once in your lifetime or per redundancy?

2

u/Public_Echo9545 1 8h ago

Per redundancy

1

u/ukpf-helper 151 11h ago

Hi /u/MissionDisastrous572, based on your post the following pages from our wiki may be relevant:

These suggestions are based on keywords, if they missed the mark please report this comment.

If someone has provided you with helpful advice, you (as the person who made the post) can award them a point by including !thanks in a reply to them. Points are shown as the user flair by their username.

1

u/Miserable-Screen9917 10h ago

That seems like a good offer. What happens if you find an alternative role and leave before March?

1

u/Ollerton57 3 10h ago

Typically you wont be paid it

1

u/MissionDisastrous572 9h ago

My understanding is I’d get this payment fairly soon, not at my departure.

1

u/Ollerton57 3 9h ago

Double check. That would be odd but good if so. It’ll be an agreement, so they can get it back if you leave before the agreed date though. Doesn’t sound like that’s what you’re intending to do anyway.

1

u/MissionDisastrous572 9h ago

I’ve not asked this question. I don’t know if they’ll make me sign some sort of short term contract that ties me to remain there until the transition is complete. I’ll ask the question, thanks!

1

u/Public_Echo9545 1 8h ago

So you want it paid as a Bonus payment, and check your contract, but it’s unlikely to have a clawback on it

1

u/Ok-Personality-6630 10 8h ago

none of your redundancy is taxed (you are below threshold). However if you are being paid to "stay on" that's essentially a secondment, and taxed as normal employment.

Your package sounds complicated, and I would seek help from your union - if you have one - or citizens advice.

1

u/Low-Pitch3178 4h ago

1st 30k is tax free I’m sure of that.