UK Redundancy Pay Calculator

How UK statutory redundancy pay works

Statutory redundancy is the legal floor every qualifying UK employee gets when their job is made redundant. You need at least two full years of continuous service with the same employer to qualify. The formula uses three weekly-pay multipliers, scaled to the age you were during each year of service:

• 0.5 weeks' pay for each full year worked aged under 22
• 1 week's pay for each full year worked aged 22 to 40
• 1.5 weeks' pay for each full year worked aged 41 or over

Two caps decide the ceiling. Service counts a maximum of 20 years, and weekly pay is capped at £751 from 6 April 2026 onwards. Multiply those together and the maximum any employer can be forced to pay as statutory redundancy in 2026/27 is £22,530. The full government guide is at gov.uk/redundancy-your-rights, and ACAS runs a free helpline if anything in the offer letter looks wrong.

The £30,000 tax-free rule (and what happens above it)

The first £30,000 of any redundancy payment lands in your bank account tax-free under section 401 of ITEPA 2003. That allowance covers statutory, contractual, and enhanced redundancy combined - it is one limit, not three. Anything above £30,000 is taxed at your marginal income tax rate (20%, 40%, or 45%) but is not subject to National Insurance.

A higher-rate taxpayer receiving a £50,000 redundancy lump sum keeps the first £30,000 clean, then pays 40% on the £20,000 above. That is £8,000 in tax, leaving £42,000 net from the redundancy element alone. Use the take-home pay calculator to model what your marginal rate will actually be in the tax year the payment lands - a large redundancy payment can briefly push you into the higher or additional rate, even if your normal salary sits below the threshold.

Notice pay, PILON, and holiday pay are taxed in full

Three items often appear on the same settlement letter as the redundancy figure but are treated very differently by HMRC:

• Worked notice pay. Salary you earn during the notice period you actually work. Ordinary earnings, fully taxable, full NI.
• PILON (Payment in lieu of notice). Your employer pays out the notice period instead of having you work it. Since the 2018 PENP rules, PILON is treated as ordinary earnings: full income tax, full employee NI. It does not eat into the £30,000 allowance because it never qualified for it in the first place.
• Holiday pay. Any accrued but untaken annual leave is paid out as salary. Same treatment - income tax and NI in full.

This is why a £50,000 headline package can deliver a take-home of well under £42,000. If £15,000 of it is PILON and holiday pay, that portion is taxed and NI'd in full before it ever reaches the bank account. The calculator above splits these out so the headline number does not flatter the offer.

Enhanced redundancy: the most-overlooked negotiation lever

Statutory redundancy is the floor, not the ceiling. Most larger UK employers - and virtually every unionised one - offer enhanced packages that go well beyond the statutory minimum. Common patterns: 2 to 4 weeks of actual pay per year of service, removal of the £751 weekly cap, removal of the 20-year service cap, an extra month of notice, or a targeted pension contribution outside the £30,000 limit.

The opinion worth stating plainly: enhanced redundancy is the single most-overlooked negotiation lever in UK employment. A 35-year-old on £50,000 with 8 years of service is owed roughly £6,000 statutory. An enhanced package at 4 weeks' actual pay per year of service is £30,800. That is six months of salary, and the difference comes down to whether the employee asks. Many workers leave it on the table because they did not know the statutory number was a floor rather than the answer. If your employer has a published redundancy policy in the staff handbook or HR portal, read it before any conversation with HR. If not, ask what package is on offer and treat the first number as an opening position.

Plug any enhanced offer into the calculator's "Enhanced offer" field to see the tax split applied to the larger figure. For specific advice on negotiation rights, consult ACAS or an employment solicitor before signing a settlement agreement.

Worked example: 10 years of service at £40,000

Take a 38-year-old on a £40,000 salary (roughly £769 a week gross) with 10 years of continuous service, made redundant in 2026.

The headline gross is £42,298, the net is £37,150. The £5,148 gap is what HMRC takes from the PILON and holiday portions plus the small slice of redundancy above £30,000.

What to do with redundancy money

Redundancy cash is unusual: it is a large lump sum landing in a tax year when your income may be falling fast. The order of operations matters more than the specific products.

1. Buffer first. Build or top up an emergency fund covering 6 to 12 months of essential outgoings before doing anything else. Redundancy is not just a one-off shock - the average time to find an equivalent role in the UK is three to six months, and a longer runway lets you turn down poor offers.
2. Clear expensive debt. Credit cards, overdrafts, and unsecured loans above 8% are guaranteed losses. Pay them off before investing anything.
3. Fill the ISA. The £20,000 annual ISA allowance is use-it-or-lose-it. If you have not used this year's allowance, moving £20,000 of the redundancy into a stocks and shares ISA shelters all future growth from tax.
4. Consider salary sacrifice before you leave. If the payment is above £30,000 and the employer agrees, asking for the excess to be paid as an employer pension contribution can sidestep the income tax on the portion above the threshold entirely. This needs to be agreed before the payment is made and structured correctly - take advice from an employment solicitor or independent financial adviser if the package is large enough for this to matter.

The salary-sacrifice-into-pension trick is worth flagging twice. For a higher-rate taxpayer with a £60,000 redundancy package, structuring the £30,000 excess as a pension contribution saves £12,000 in income tax. The money goes into the pension instead of the bank account, but it is the same £30,000 net of tax either way - one version costs you nothing in tax, the other costs £12,000. The trade-off is access: pension money is locked until age 55 (rising to 57 in 2028). If you need the cash to bridge a job search, take it as taxable income. If you do not, the pension route is significantly more efficient.

Frequently asked questions