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Top Slicing Relief

As stated above, a certain amount of ones redundancy payment can be tax free and the balance then subject to tax. This is normally taxed as part of the current year’s income when one becomes redundant.

Good news – employees are entitled to additional tax relief known as Top Slicing Relief – if you are made redundant prior to 31st December 2013.

In brief, top slicing relief relates to the tax payable and ensures that an employee’s lump sum is not taxed at a rate higher than their average rate of tax for the 3 years prior to their redundancy. Top slicing relief does not affect your initial tax calculations, but reduces the final figure. This can be claimed at the end of the tax year.


Mr. A was made redundant. The taxable amount of his lump sum is €21,000, which is taxed at his marginal rate of 41%. His “average rate of tax” for the prior 3 tax years was 30%.

Top slicing relief is €2,310 [€21,000 x (41% – 30%)]

Mr. A will be due a tax refund of €2,310.

You can see from the above examples that the calculation of redundancy payment is very complex. However, the good news is, if you have been made redundant, you may be entitled to a tax refund. Contact Irishtaxback.ie  – we will be happy to assist you in reviewing and calculating your tax free entitlements.

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