How is statutory redundancy pay calculated in the UK?

Full answer

**Statutory Redundancy Pay (SRP)** is the minimum you are legally entitled to when made redundant, provided you have at least 2 years of continuous employment. **The formula:** - **Under 22:** 0.5 week's pay per year of service - **Aged 22–40:** 1 week's pay per year of service - **Aged 41 and over:** 1.5 weeks' pay per year of service **2026/27 caps:** - **Weekly pay cap:** £643 (this is set by government each April) - **Service cap:** Maximum 20 years counts - **Maximum statutory payment:** £643 × 1.5 × 20 = **£19,290** **Worked example:** Age 45, 12 years' service, salary £50,000/week = £961 — but capped at £643: - 2 years aged 39–40: 2 × 1 × £643 = £1,286 - 10 years aged 41–45: 10 × 1.5 × £643 = £9,645 - **Total SRP: £10,931** **The £30,000 tax-free threshold:** Section 401 of ITEPA 2003 exempts the first £30,000 of redundancy payments (statutory + any enhanced amount) from Income Tax and NI. Amounts above £30,000 are taxed as employment income. This threshold has been unchanged since 1988 — making it increasingly eroded by fiscal drag. **PENP (Post-Employment Notice Pay):** If you leave without working your full notice period, the employer must calculate PENP — the basic pay for unworked notice — which is subject to full Income Tax and NI (it is not covered by the £30,000 exemption). PENP reduces the tax-free element of any enhanced settlement. **Enhanced redundancy:** Many employers offer enhanced redundancy above the statutory minimum. This is often expressed as actual weekly pay (not the £643 cap) × years of service × age multiplier. Enhanced pay still benefits from the £30,000 exemption. **When to claim SRP:** You must claim within 6 months of the termination date (or the employment tribunal can extend to 12 months in exceptional circumstances). If the employer is insolvent, you can claim from the National Insurance Fund via gov.uk.

Related guides

• Uk Redundancy Tax Treatment