Calculate tax on a settlement or termination package: PENP taxed as earnings (tax + NIC), the £30,000 tax-free allowance and the taxed excess.
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Splits a termination package the way HMRC does (2025/26): Post-Employment Notice Pay — the part covering unworked notice — is always taxed as earnings with income tax AND employee NIC; the remainder (plus statutory redundancy) is tax-free up to £30,000 combined, and the excess bears income tax only (employer-only Class 1A NIC).
£50,000 package with 3 months' unworked notice at £4,000/month and £40,000 of other income: PENP £12,000 (tax £2,746 + NIC £856.20), remaining £38,000 → £30,000 free and £8,000 taxed at 40% — net received £43,197.80.
Enter the termination package (excluding statutory redundancy) and any statutory redundancy separately.
Enter monthly basic pay and the months of notice not worked.
Deduct any contractual PILON already taxed through payroll.
Read the PENP, the tax-free amount and the net received.
Last data update
July 5, 2026
Sources and references
GOV.UK — Taxation of termination payments (gov.uk/guidance/taxation-of-termination-payments); EIM13874+; rates and thresholds 2025/26.
The data in this calculator is updated regularly to reflect the latest official rates. When in doubt, consult the official sources listed above.
The slice of your settlement covering notice you did not work. Since 2018 it is always taxed as earnings — income tax and employee NIC — regardless of how the agreement labels it.
Statutory redundancy pay plus the genuinely ex-gratia part (after removing PENP), up to £30,000 combined. The excess is taxed as income but with no employee NIC.
Work or get paid contractually for your notice (reduces PENP), consider employer pension contributions from the excess, and time the payment against your other income for the year.