Redundancy

If you’re made redundant, you may receive a lump sum payment from your employer. However, if all of your lump sum is statutory redundancy (subject to a maximum lifetime tax-free limit of €200,000), no tax will be due.

You’re entitled to one of the following tax exemption options on your redundancy payment, whichever is the higher:

1.Basic Exemption

The Basic Exemption due is €10,160 plus €765 for each complete year of service (this doesn't include statutory redundancy which is tax-free).

2. Basic Exemption plus Increased Exemption

An additional €10,000 (called the Increased Exemption) is also available in 2 circumstances.

a. If you haven't received a tax-free lump sum in the last 10 years and you’re not getting a lump sum pension payment now or in the future.

b. If you’re in an occupational pension scheme, the Increased Exemption is reduced by any tax-free lump sum from the pension scheme you may be entitled to receive.

3. Standard Capital Superannuation Benefit (SCSB)

This is an additional relief that typically benefits people with higher earnings and long service. It can be used if the following formula gives an amount greater than either basic exemption or Basic Exemption plus Increased Exemption.

Calculation of tax in redundancy

As mentioned above, a certain amount of your redundancy payment is tax-free and the balance will be taxed as part of the current year's income. The amount of your lump sum subject to tax is not subject to PRSI, but the Universal Social Charge may be payable.