Statutory Redundancy Pay Rules
You qualify after 2 full years with the same employer. For each full year of service, counted back from your redundancy date, you get:
- half a week's pay for each year you were under 22
- one week's pay for each year you were 22 to 40
- one and a half weeks' pay for each year you were 41 or older
Only the last 20 years count, and weekly pay is capped at £751 for redundancies on or after 6 April 2026. The most anyone can get is £22,530.
Statutory pay = weeks owed × min(weekly gross pay, £751)
Weeks of Pay by Age and Service
| Age | 5 years | 10 years | 15 years | 20 years |
|---|---|---|---|---|
| 25 | 4 | n/a | n/a | n/a |
| 35 | 5 | 10 | 14 | n/a |
| 45 | 7 | 12 | 17 | 22 |
| 55 | 7.5 | 15 | 22 | 27 |
| 62 | 7.5 | 15 | 22.5 | 30 |
Multiply the weeks by your weekly gross pay, up to £751. Someone aged 62 with 20 years reaches the maximum 30 weeks.
The £30,000 Tax Free Allowance
The first combined £30,000 of statutory redundancy pay, enhanced or extra severance and non-cash benefits you keep, such as a laptop, is free of income tax. Anything above is taxed at your normal rates.
No employee National Insurance is due on this money, even above £30,000. Your employer pays 15% Class 1A NI on the part over £30,000 instead.
Notice Pay, PILON and Holiday Pay
Pay for your notice period is earnings, not redundancy pay. That covers working your notice, pay in lieu of notice (PILON), and post-employment notice pay, the part of a severance sum HMRC treats as the pay you would have earned over an unworked notice period. All of it is taxed and has 8% NI below £50,270.
Unpaid wages, bonuses due and accrued holiday pay are taxed the same way. Only the genuine compensation for losing the job gets the £30,000 treatment.
Worked Redundancy Example
Age 52, 20 years of service, £900 a week, £25,000 enhanced severance, £4,500 notice pay, £35,000 already earned this tax year.
- Statutory: 25.5 weeks × £751 cap = £19,150.50
- Termination award: £44,150.50, of which £30,000 is tax free and £14,150.50 is taxable
- Income tax on notice pay plus the taxable award: £4,406.20
- NI on notice pay: £360
- Net package: £43,884.30 out of £48,650.50
Because £35,000 of salary was already earned, part of the taxable money falls into the 40% band. The employer also owes £2,122.57 of Class 1A NI.
Three Redundancy Packages Compared
| Case | Statutory pay | Gross package | Tax and NI | Net package |
|---|---|---|---|---|
| Age 28, 6 years, £550 a week | £3,300 | £4,400 | £308 | £4,092 |
| Age 45, 12 years, £700 a week | £9,800 | £22,800 | £840 | £21,960 |
| Age 52, 20 years, £900 a week | £19,150.50 | £48,650.50 | £4,766.20 | £43,884.30 |
In the first two cases the only tax comes from the notice pay, since the redundancy money stays under £30,000.
How the Payment Reaches You
Most employers pay redundancy money in the final payslip, before the P45, using your normal tax code. If it is paid after the P45, HMRC rules require code 0T, which taxes everything at basic or higher rates with no allowance. Any overpayment comes back through your next job or a claim to HMRC.
The calculator taxes the money on top of your other pay this tax year, using the yearly bands. That is what you end up paying once the year is settled.
Assumptions and Sources
- Employee in England, Wales or Scotland with at least 2 years of service; Northern Ireland sets its own statutory scheme.
- Income tax at 2026/27 rates on top of the other pay you enter, tax code 1257L, NI on annual thresholds.
- No pension contribution from the package, and no injury or disability payment, which can be fully exempt.
Sources: GOV.UK Redundancy pay, Redundancy tax and National Insurance, Termination payments and tax, and HMRC Rates and thresholds for employers 2026 to 2027. Rates for 2026. For US style severance, see the Severance Pay Calculator.
Frequently Asked Questions
Is redundancy pay taxable in the UK?
Not up to £30,000. Statutory and extra redundancy pay share that allowance; the rest is taxed as income but has no employee NI.
What is the weekly pay cap for redundancy in 2026?
£751 for redundancies on or after 6 April 2026, giving a maximum statutory payment of £22,530.
Is pay in lieu of notice tax free?
No. PILON and post-employment notice pay are taxed and NI'd like salary, and they do not use the £30,000 allowance.
How many weeks of redundancy pay will I get?
Half a week per year under 22, one week per year from 22 to 40, and one and a half weeks per year from 41, for up to 20 years.
Can I pay my redundancy money into a pension?
Many employers allow it through salary sacrifice before the payment is made. Money paid in that way avoids tax, but agree it before your last payslip.
Why was so much tax taken from my redundancy payment?
Often because it was paid after your P45 on code 0T. Once the tax year is reconciled, HMRC refunds what was over-collected.