The two parts of your payment
Statutory redundancy
The legal minimum (2 weeks/year + 1 week, capped at €600/week). 100% tax-free, no income tax, no USC, no PRSI. It never uses up any of your exemptions.
Ex-gratia (employer's extra)
Anything on top of statutory. This is taxable in principle, but a big slice is sheltered by whichever of the three reliefs below is largest.
Which taxes apply to the taxable part?
Only the ex-gratia amount above your best exemption is taxable. On that taxable slice:
Note: the tax-free portion and the statutory portion are free of all three. Top Slicing Relief was abolished for payments from 1 January 2014.
The 2026 tax bands, in plain numbers
These are the rates charged on the taxable slice of your ex-gratia. Because that slice sits on top of your other income for the year, it's usually taxed at your highest bands.
Income tax (single person)
| Yearly income | Rate |
|---|---|
| Up to €44,000 | 20% |
| Over €44,000 | 40% |
The €44,000 point is higher if you're married (up to €53,000 on one income, €88,000 on two) or a single parent (€48,000).
USC
| Yearly income | Rate |
|---|---|
| Up to €12,012 | 0.5% |
| €12,012 – €28,700 | 2% |
| €28,700 – €70,044 | 3% |
| Over €70,044 | 8% |
You pay no USC at all if you earn €13,000 or less in the year.
The three tax reliefs
Revenue lets you use whichever one of these gives you the most tax-free money.
1. Basic Exemption
Everyone with the qualifying service gets this. Example, 10 years: €10,160 + (10 × €765) = €17,810 tax-free.
2. Increased Exemption
An extra €10,000, but only if you haven't claimed more than the Basic Exemption from a lump sum in the last 10 years, and you either have no work pension lump sum or give up your right to it. Any pension lump sum you keep is subtracted from the €10,000; if it's over €10,000, the increase is gone. Revenue grants it once in any 10-year period.
3. SCSB (Standard Capital Superannuation Benefit)
"Average annual pay" is your average over the last 36 months. This is usually the biggest relief for people with long service or high pay.
Worked example 1: a simple case
Aoife has 8 years' service, earns €900/week (≈ €46,800/year), and is offered a €40,000 ex-gratia lump sum on top of statutory. She has no pension lump sum. Her income is over €44,000, so she pays income tax at 40%, and under €70,044, so her USC is 3%.
| Statutory redundancy (capped €600 × (2×8+1)) | €10,200 · tax-free |
| Basic Exemption (€10,160 + 8×€765) | €16,280 |
| Increased Exemption (+€10,000) | €26,280 ✓ best |
| Taxable part (€40,000 − €26,280) | €13,720 |
| Income tax @ 40% + USC @ 3% | −€5,900 |
| Total in Aoife's pocket | €44,300 |
SCSB would be €46,800 × 8 ÷ 15 = €24,960, so the Increased Exemption (€26,280) still wins. Her weekly pay is above €600, so statutory is worked out on the €600 cap.
Worked example 2: SCSB wins (long service)
Eileen has 18 years' service and average pay of about €31,667. She's offered a €60,000 termination lump sum and also gets an €11,000 tax-free pension lump sum.
| Basic Exemption (€10,160 + 18×€765) | €23,930 |
| Increased Exemption | Blocked (pension > €10,000) |
| SCSB ((€31,667 × 18 ÷ 15) − €11,000) | €27,000 ✓ best |
| Taxable part (€60,000 − €27,000) | €33,000 |
Based on Revenue's own worked example. Eileen is taxed (income tax + USC) on €33,000; the rest is tax-free.
The €200,000 lifetime cap & your pension
There's a €200,000 lifetime limit on the total tax-free ex-gratia you can receive across your whole career. Statutory redundancy doesn't count towards it.
Your pension matters because a tax-free pension lump sum reduces both the Increased Exemption and the SCSB. Sometimes it's worth waiving a pension lump sum right to boost your SCSB relief, this is exactly the kind of decision worth checking with a financial adviser.
See these reliefs applied to your numbers automatically: