Redundancy
Redundancy occurs when you lose your job because fewer people are needed at your workplace or your employer's business closes down. A redundancy payment is one where money is paid solely to compensate you for being made redundant. This section does not deal with retirement, resignations, or sackings.
Various payments may be received on redundancy. The following payments will incur tax and national insurance deductions:
- unpaid wages
- payment in lieu of notice (taxable in full if referred to in any condition of the employment or if employer normally pays them)
- holiday pay owed to you (contact your local tax office for more information)
- restrictive covenants
- payments for meeting production targets or doing extra work in the period leading up to redundancy
- occupational pensions (no NIC is payable).
Tax relief for redundancy payments
There are two types of relief:
- up to £30,000 from one job
- full or partial exemption if you were not living in the UK for tax purposes during your employment.
Your employer should deduct the tax and national insurance on your payment before you receive it.
Unemployment after redundancy
You must give your P45 to the jobcentre if you are claiming jobseeker's allowance.
If you are not claiming the jobseeker's allowance, ask for a form P50 from your tax office. Return it to them with parts 2 and 3 of your P45.
This page was last reviewed on 03 April 2006. The information may not reflect changes in legislation made after this date.
This is only a guide to your tax position and should not be relied on in place of professional accounting or tax advice. Any calculated figures are illustrative and are based on the data you provided.
