Redundancy Tax Ireland 2026

Basic Exemption (Tax-Free Amount)

The first €10,160 (plus €765 for each complete year of service) of any redundancy payment is entirely tax-free. This is called the Basic Exemption. It applies automatically to all statutory and ex-gratia redundancy payments.

Example: If you worked for 12 years, your basic exemption is €10,160 + (€765 × 12) = €19,340 tax-free. Any amount below this threshold is paid without deductions.

Increased Exemption (For 15+ Years Service)

After 15 complete years of service with the same employer, Revenue allows an Increased Exemption of €10,000 per year of service, subject to a lifetime cap of €200,000. This applies instead of the basic exemption formula.

Example: 20 years of service = €10,000 × 20 = €200,000 tax-free (subject to lifetime cap). This is significantly more generous than the basic exemption.

The €200,000 lifetime cap applies across all employments. If you previously claimed €50,000 under this relief, only €150,000 remains available for future redundancies.

Standard Capital Superannuation Benefit (SCSB)

For payments exceeding the basic or increased exemption, the next portion may qualify for Standard Capital Superannuation Benefit (SCSB) relief. This calculates a tax-efficient allowance based on your average annual earnings and years of service.

SCSB Formula: (Average annual pay in last 3 years × Years of service) ÷ 15, minus any tax-free lump sums already received from pension schemes.

The SCSB amount is taxed at the standard rate only (currently 20%), rather than your marginal rate. This relief is particularly valuable for higher earners facing the 40% tax band.

Taxation of Ex-Gratia Payments Above Exemptions

Once the basic exemption, increased exemption, and SCSB relief have been applied, any remaining balance is subject to income tax, USC, and PRSI at your marginal rate (20% or 40% depending on earnings).

Employers must deduct tax at source using emergency tax rates if you do not provide a valid Tax Credit Certificate. This often results in overpayment, which can be reclaimed through a P50 form submitted to Revenue after leaving employment.

Statutory Redundancy vs Ex-Gratia Payments

Statutory redundancy payments (calculated under the Redundancy Payments Acts) are always tax-free, regardless of amount. The tax treatment discussed above applies only to ex-gratia payments — voluntary amounts paid by employers above the statutory minimum.

If your employer offers a lump sum that includes both statutory and ex-gratia elements, ensure the breakdown is clearly documented. Only the ex-gratia portion is potentially taxable under exemption and SCSB rules.

Claiming Overpaid Tax Back (Form P50)

If your employer deducted emergency tax rates or applied incorrect exemptions, you can reclaim overpaid tax using Form P50. Submit this to Revenue within four years of the tax year in which the payment was made.

Include payslips, P45, redundancy payment breakdown, and any correspondence confirming years of service. Revenue typically processes refunds within 6-8 weeks of receiving complete documentation.

Get Expert Tax Advice on Redundancy Payments

Incorrectly structured redundancy packages can result in thousands of euros in unnecessary tax charges. Richard O'Shea Solicitor at Mary Molloy Solicitors provides expert advice on:

• Calculating basic and increased exemptions accurately
• Maximising SCSB relief for higher earners
• Negotiating tax-efficient settlement structures
• Challenging incorrect tax deductions by employers
• Filing P50 claims to recover overpaid tax

Contact Mary Molloy Solicitors at 01 5827148 or richardoshea@marymolloysolicitors.com for a detailed redundancy tax review.

Need Help With Redundancy Tax Calculations?

Get expert advice from Richard O'Shea Solicitor at Mary Molloy Solicitors on tax-efficient redundancy settlements and Revenue claims.