Dáil Éireann Debate, Thursday - 9 October 2025
152. Deputy Ken O'Flynn asked the Minister for Finance if he will review the taxation treatment of redundancy payments, particularly ex-gratia or enhanced redundancy payments made in cases of involuntary redundancy, with a view to exempting such payments from income tax in recognition of the financial hardship associated with job loss. [54463/25]
Amharc ar fhreagra153. Deputy Ken O'Flynn asked the Minister for Finance if his Department has conducted any recent review or cost–benefit analysis on increasing the tax-free threshold for redundancy payments, and if he will publish the findings of any such review. [54464/25]
Amharc ar fhreagra154. Deputy Ken O'Flynn asked the Minister for Finance the estimated fiscal impact on the Exchequer of exempting all redundancy payments arising from involuntary redundancies from income tax, PRSI, and USC, based on the most recent available data. [54465/25]
Amharc ar fhreagra155. Deputy Ken O'Flynn asked the Minister for Finance if he will consider reforming the taxation rules to align redundancy payments with other non-taxable lump sums, such as lottery winnings or compensation payments, in circumstances where redundancy arises through no fault or choice of the employee. [54466/25]
Amharc ar fhreagra156. Deputy Ken O'Flynn asked the Minister for Finance the total tax yield to the Exchequer from taxpayers who received redundancy payments in each of the past five years. [54467/25]
Amharc ar fhreagraI propose to take Questions Nos. 152, 153, 154, 155 and 156 together.
The position is that the Redundancy Payment Acts 1967 – 2014 impose a statutory obligation on employers to recompense employees dismissed for reasons of redundancy, laid off or kept on part time for a minimum period. This includes statutory redundancy, which is calculated on the basis of two weeks’ pay per year of service, plus one additional week, subject to a maximum weekly pay figure of €600. Section 203 Taxes Consolidation Act 1997 (TCA 1997) exempts from income tax any payment arising in respect of statutory redundancy.
Lump sum payments which arise as part of a redundancy package come within the charge to income tax by virtue of section 123 Taxes Consolidation Act 1997 (“TCA 1997”). There are, however, significant reliefs available on the potential tax liability arising from such payments contained in section 201 and Schedule 3 of TCA 1997.
Section 201 TCA 1997 contains the provisions for an exemption or relief from taxation for payments on retirement, redundancy or termination. The basic exemption, increased exemption and the Standard Capital Superannuation Benefit (‘SCSB’) give relief from amounts which would otherwise be subject to taxation and are subject to a lifetime individual limit of €200,000.
Where a taxpayer receives an ex-gratia lump sum payment as part of a redundancy, a liability to tax arises on the amount of the payment that exceeds either the:
• Basic exemption and increased exemption, if due, or
• SCSB.
The Basic Exemption is €10,160 plus €765 for each complete year that a taxpayer worked for their employer. An ex-gratia termination payment will be tax free if it does not exceed the Basic Exemption.
A taxpayer may be entitled to an increase of €10,000 on the basic exemption if:
• they have not received an amount in excess of the basic exemption in the previous ten years, and,
• they are a not a member of an occupational pension scheme, or, if they are a member of an occupational pension scheme, but they revoke their entitlement to receive a tax-free lump sum from that scheme.
The SCSB is an additional relief taxpayers may be entitled to and is provided for in Schedule 3 of TCA 1997. SCSB is computed at 1/15th of a taxpayer’s average annual pay for the last 36 months in employment. This is then multiplied by the number of complete years of service with the employer. Any tax-free lump sum payments received, or which the taxpayer is entitled to receive, from their work pension, are subtracted from this benefit.
As stated, the basic exemption, increased exemption and the SCSB give relief from amounts which would otherwise be subject to taxation and are subject to a lifetime limit of €200,000 and the individual may apply whichever of the three exemptions is most beneficial to them. This lifetime limit is only applicable to ex-gratia lump sum payments which arise as part of a redundancy package and if any individual receives an amount exceeding the €200,000, the balance would be subject to income tax.
The Department of Enterprise, Trade and Employment (DETE) provides guidance on an individual’s statutory redundancy entitlements, and further information on same can be found on their website at: enterprise.gov.ie/en/what-we-do/workplace-and-skills/redundancy-payments/
In addition, the Revenue website sets out further information on the tax treatment of lump sum termination payments in the hands of the employee, and that information is accessible at: [www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/lump-sum-payments/index.aspx]
I am advised by Revenue that redundancy payments are not separately recorded on payroll submissions, but instead are captured together with retirement lump sums. As both payment types are captured together it is not possible to identify which of those relate only to redundancy payments. Therefore, it is not possible to provide the data requested in relation to these payments, such as the number of taxpayers in receipt of such payments, the average payment amount, information in relation to the tax yield associated with such payments, or the cost of exempting these payments from taxation. In relation to the Deputy’s further questions, my Department has not carried out a recent review or cost benefit analysis in this area.
Finally, as you will appreciate, there are many requests for the introduction of new tax reliefs and the extension of existing ones. In considering these, it is important to be mindful of the public finances and the many demands on the Exchequer and to have regard to budgetary constraints and the equitable treatment of all taxpayers. Tax reliefs, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult. Therefore, I have no plans to enhance the relief any further at this time.
