Redundancy and severance tax calculator (Ireland)

How it is worked out

1. Statutory redundancy (2 weeks' pay per year of service plus 1 week, pay capped at €600 a week) is tax-free and sits outside everything below.
2. Basic exemption: €10,160 plus €765 for each complete year of service.
3. Increased exemption: up to €10,000 more, less your tax-free pension lump sum, if you had nothing above the basic exemption in the last ten years.
4. SCSB: average pay over the last 3 years × complete years ÷ 15, less your tax-free pension lump sum.
5. The highest of these is tax-free, up to €200,000 for your lifetime, less what earlier payments used.
6. The rest is taxed as pay when it is paid: income tax and USC, no PRSI.

Before you sign

• Ask the pension administrator, in writing, for the value of your tax-free lump sum at your leaving date. It drives the SCSB figure.
• If waiving the lump sum pays, the waiver must reach the scheme administrator on or before your leaving date, and it cannot be undone.
• Check how the package is worded: anything due under your contract is taxed in full. Your employer applies the exemption through payroll; if they don't, claim it from Revenue through MyEnquiries.
• Had severance before? Payments since 2019 are reported to Revenue through payroll, so Revenue can tell you what is on record.

Frequently asked questions

How much of a severance payment is tax-free in Ireland?
Statutory redundancy is fully tax-free. On top of that, the highest of three exemptions applies to the rest of the package: the basic exemption (€10,160 plus €765 for each complete year of service), the increased exemption (up to €10,000 more) or SCSB (your average pay over the last 3 years × years of service ÷ 15, less your tax-free pension lump sum). The total is capped at €200,000 for your lifetime.

How is statutory redundancy calculated?
2 weeks' pay for every year of service plus 1 extra week, with weekly pay capped at €600. You need 104 weeks of continuous service and the job must genuinely go. It is free of income tax, USC and PRSI, and it does not use up any of the other exemptions.

What is SCSB?
The Standard Capital Superannuation Benefit: your average yearly taxable pay over the last 36 months (salary, bonus, overtime, benefits in kind) times your complete years of service, divided by 15, less the "relevant capital sum": any tax-free lump sum from your employer's pension scheme, including the value today of one you will get at retirement. It usually beats the basic exemption for long service and higher pay.

Should I give up my pension lump sum to get the full SCSB?
You can sign an irrevocable waiver of the tax-free pension lump sum from that job, which removes it from the SCSB sum and can restore the increased exemption. You must send it to the pension scheme administrator on or before your leaving date. It only pays if the extra tax-free severance now beats the tax-free lump sum you give up; this calculator shows the difference.

How is the taxable part taxed?
As pay, at the time it is paid: income tax at your marginal rate and USC. PRSI is not charged on it. Top-slicing relief was abolished, so a large lump sum can push the excess into the 40% band and the 8% USC rate.

Does the €200,000 limit include my pension lump sum?
No. The €200,000 lifetime cap covers the basic, increased and SCSB exemptions on all your termination payments since they began. Your pension lump sum has its own separate €200,000 tax-free lifetime limit; it only reduces the increased exemption and SCSB, as above.

Is pay in lieu of notice tax-free?
Only if your contract does not provide for it. A payment you are entitled to under your contract, including contractual pay in lieu of notice, is taxed in full as pay and gets none of these exemptions. So do holiday pay, arrears and bonuses owed.

Related

• Jobseeker's Benefit calculator: pay-related benefit after a redundancy.
• Pension tax relief calculator: putting part of the lump sum into a pension.
• Where should my money go? State Savings, deposits, ETFs and pension after tax.