Which Tax Year Does My Redundancy Impact

I'm planning for redundancy and early retirement in the next 12 months. I expect redundancy of around £130k, where I'll get 30k tax free and use salary sacrifice to put the rest into a pension. I know i have a £40k/year tax free allowance on the pension contributions, counting back unused allowance in the previous 3 years - my pension contribution shows a value of around £20k/year for tax purposes.

If I take redundancy such that my finishing date is the end of March 2024, I would receive my final monthly salary,  redundancy pay and PILON at the end of April.

Would my redundancy pay and PILON count in the 2023/2024 tax year or the following tax year?

If it counts in the following tax year, my pension contributions will be minimal in that tax year and i can therefore push pretty much all of the £100k redundancy payment (after £30k tax free) into my pension. If it counts in the 2023/2024 tax year, i would have already used around £20k of my tax free pension contribution allowance and would have to pay higher rate tax on around £20k of my redundancy (3 years at £20k, 1 year at almost £40k vs 4 years at £20k) or push my finish date out to end of April 2024.


  • Scorpio33Scorpio33 Forumite
    712 Posts
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    It is usually on the last date you are employed. From the above info that would be end of March 2024, so it would be the 2023/24 tax year. When it is physically paid is irrelevant, its your last contractual date of employment.
  • edited 13 March at 4:29PM
    chrisburchrisbur Forumite
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    edited 13 March at 4:29PM

    The GOV.UK site 


    advises that....

    "Any tax and National Insurance due on your termination payment will be taken automatically by your employer in your final payslip.

    Your employer will put any taxable parts of your termination payment through their payroll and deduct any Income Tax or National Insurance under Pay As You Earn (PAYE)."

    PAYE is normally deducted as at the date of payment so would suggest that a payment at the end of April '23 would fall in 23/24 tax year.

    There may be some rules relating to redundancy that I am not aware of but nothing seems to be mentioned on the GOV.UK site.

  • edited 15 March at 10:13PM
    irharrisirharris Forumite
    12 Posts
    10 Posts First Anniversary
    edited 15 March at 10:13PM
    Many thanks for the replies. 

    However, it looks like that nice Mr Hunt has addressed my problem by upping the annual allowance to £60k

    I don't think making it easier to retire early was his aim and I'm not sure I'm the most deserving recipient of limited funds.
  • tapertaper Forumite
    13 Posts
    Tenth Anniversary First Post Combo Breaker
    I’m in exactly the same position as you with a £130k redundancy package in the next 9-18 months. I’m very happy with today’s announcement! Always trying to avoid higher rate tax where I can!
  • wolvomanwolvoman Forumite
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    Part of the Furniture 1,000 Posts Combo Breaker
    It worries me what companies you work for where you can plan redundancy? How odd.
  • irharrisirharris Forumite
    12 Posts
    10 Posts First Anniversary
    In my case it’s a large IT company that always seems to be making redundancies as roles are moved offshore.

    My role is customer facing, so less likely to be off shored. 

    However, I can request voluntary redundancy so that someone whose job is off shored and wants to stay with the company could move into my role.

    I’ve been open with my manager, so we can pick a mutually beneficial time in the future, so I don’t leave with no warning and they’re left struggling to cover my work
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