Redundancy Tax Refund Ireland

Losing your job is never easy, but understanding your redundancy tax refund entitlements in Ireland can help ease the financial burden during this transition. Many Irish workers don't realize they may be entitled to significant tax relief on their redundancy payments, potentially keeping thousands of euros that would otherwise go to Revenue. Whether you've received a statutory redundancy payment, an ex-gratia lump sum, or both, knowing what's tax-free and how to claim any overpaid tax is crucial to maximizing your financial position.

Understanding Redundancy Tax Relief in Ireland

When you're made redundant in Ireland, your redundancy payment typically consists of two components: statutory redundancy (the legal minimum your employer must pay) and any additional ex-gratia payment. The good news is that substantial portions of these payments can be completely tax-free under specific Revenue rules.

The cornerstone of redundancy tax relief is the Standard Capital Superannuation Benefit (SCSB), which allows up to €200,000 of your redundancy package to be tax-free, subject to meeting certain conditions. This is separate from and in addition to your statutory redundancy entitlement. However, the calculation can be complex, involving your length of service, average pay over the final three years, and whether you've received similar payments in the past.

What's Tax-Free in Your Redundancy Package?

Statutory Redundancy Payment

Your statutory redundancy payment is completely tax-free and doesn't count toward the SCSB limit. For 2025, this is calculated as two weeks' pay for every year of service, plus one additional week's pay. Your weekly pay is capped at €600 per week for statutory calculation purposes, even if you earn more.

Basic Exemption

Beyond statutory redundancy, you're entitled to a Basic Exemption of €10,160 plus €765 for each complete year of service. This amount is tax-free and separate from the SCSB calculation.

Increased Exemption (SCSB)

The Increased Exemption, also known as the Standard Capital Superannuation Benefit, provides much more generous relief. This allows tax-free redundancy payment of up to €200,000 based on the formula: average annual earnings over the last three years × number of complete years of service ÷ 15, less any previous tax-free lump sums received from the same or associated employers. This calculation can be significantly more beneficial than the Basic Exemption for long-serving employees.

Practical Examples: Real Numbers

Common Tax Refund Scenarios After Redundancy

Many employers apply emergency tax rates to redundancy payments because they're unsure of your full tax position or which exemptions apply. This often results in significant overpayment of tax that you're entitled to claim back. Additionally, if you don't secure employment immediately after redundancy, you may have overpaid tax throughout the year based on the annual tax credits and rate bands you didn't fully utilize.

If you're changing jobs after redundancy, proper management of your tax credits is essential to avoid overpaying tax in your new position. Similarly, understanding your severance package tax treatment ensures you keep every euro you're entitled to.

Your personal circumstances also matter. If you're married or in a civil partnership, reviewing your married tax credits after redundancy can reveal additional refund opportunities, particularly if household income has changed significantly.

Additional Payments and Top-Slicing Relief

If any portion of your redundancy payment exceeds the tax-free thresholds, Revenue applies top-slicing relief to reduce the tax burden. This calculation spreads the taxable portion over the number of years you worked (up to a maximum of 15 years), applies tax at the averaged rate, then multiplies back. This prevents you from being pushed into higher tax brackets on what is essentially deferred compensation for years of service.

Payments in lieu of notice are treated differently—these are fully taxable as employment income and don't benefit from redundancy exemptions. It's important to distinguish these on your P45 and in any refund claim to ensure accurate calculations.

How to Claim Your Redundancy Tax Refund

Claiming a redundancy tax refund involves submitting detailed documentation to Revenue, including your P45, redundancy statement showing the breakdown of payments, evidence of your service period, and calculations demonstrating the correct application of exemptions. The complexity of SCSB calculations and top-slicing relief means professional assistance is invaluable in ensuring you receive your maximum entitlement.

Revenue scrutinizes redundancy claims carefully, and incorrectly completed forms or missing documentation can delay your refund by months—or result in leaving money on the table. Professional tax advisors understand the nuances of redundancy tax law and can identify refund opportunities you might miss.

Frequently Asked Questions