Solution Properties
Solution ID:
222001000101536
Last Modified Date:
Wed Jul 08 13:40:19 UTC 2026
Taxonomy Path:
Case category//How do I...//processing
Author:
[email protected]
Set up a redundancy payment
Description

Employees made redundant only pay tax on payments over £30,000. They don’t pay any National Insurance.

This means you can set up two different payments in payroll to process redundancy below and above the £30,000 threshold.

For more in information, read the HMRC article at gov.uk.

Cause
Resolution

Before you start

Check whether the payment is subject to pension or attachment of earnings orders. For more information, go to GOV.UK or contact your pension provider.

To process this in Sage Payroll, you can create a post tax and post NI payment up to the value of £30,000. If the payment is above £30,000, you'll also need to set up a payment subject to tax and employer's Class 1A NI.

Set up a redundancy payment

Under £30,000 (not subject to tax and NI)

▼Steps to create post tax and post NI payment
  1. Select Settings from the menu bar and choose Payments and deductions.
  2. Select Create New Payment.
  3. Enter the following information:
    Payment Category Select Redundancy.
    Payment Type Select Non-taxable redundancy. 

     
    Name

    Enter a name for the payment if required. This appears on the employee’s payslip to identify the payment.
    Description Enter an explanatory text about the payment. This won't show on the payslip.
    Include in Calculation of There are two options available:
  4. Select Save and then Done.

Over £30,000 (subject to tax and employer's Class 1A NI)

This is for the portion of the payment over £30,000. For example, the full redundancy is £40,000, this payment is for £10,000.

▼Steps to create payment subject to tax and employer's Class 1A NI
  1. Select Settings from the menu bar and choose Payments and deductions.
  2. Select Create New Payment.
  3. Enter the following information:
    Payment Category Select Redundancy
    Payment Type Select Taxable redundancy.

     
    Name

    Change the name of the payment if required. This name appears on the employee’s payslip to identify the payment.
    Description Enter an explanatory text about the payment. This won't show on the payslip.
    Include in Calculation of There are two options available:
  4. Select Save and then Done.

Process an employees' redundancy pay

To assign the new payment to the employee, read Process an employees redundancy pay.

Steps to duplicate
Related Solutions

Closing a business