Redundancy Pay UK 2025/26: How Much Will You Get?

Quick answer

If you're made redundant in the UK in 2025/26, you're entitled to statutory redundancy pay based on:

1. Your age at the time of redundancy.
2. Your length of continuous service (capped at 20 years).
3. Your weekly pay (capped at £719/week for redundancies from 6 April 2025).

The formula:

Maximum payout: 30 weeks × £719 = £21,570 (someone aged 61 with 20+ years of service earning £719/week or more).

The first £30,000 is tax-free. Above £30,000 is taxed as employment income.

How the calculation works

You add up the weeks owed for each completed year of service, using your age in that year. So:

Worked example — Sarah, age 35, 12 years' service, £600/week pay

• Years before age 22: 0 (she was 23 when she started)
• Years aged 22-40 covered by her 12 years: all 12
• Years aged 41+: 0

Weeks owed: 12 × 1 = 12 weeks Weekly pay used: £600 (under the £719 cap, so use actual) Statutory redundancy: 12 × £600 = £7,200

This is tax-free (well under £30k).

Worked example — Mark, age 55, 25 years' service, £900/week pay

Mark joined at age 30, was made redundant at age 55. 25 years total — but only 20 years count.

Of those 20 years (i.e. last 20 of his service, age 35-55):

• Years aged 22-40 covered by his last 20: roughly 5 years (age 35-40)
• Years aged 41+ covered: 15 years (age 41-55)

Weeks owed: (5 × 1) + (15 × 1.5) = 5 + 22.5 = 27.5 weeks Weekly pay used: £719 (capped) Statutory redundancy: 27.5 × £719 = £19,772.50

This is also tax-free (under £30k).

Worked example — James, age 61, 20+ years' service, £1,200/week pay

James is at the maximum.

• Years aged 22-40 covered by his last 20: 0 (he's 61, so last 20 years started at age 41)
• Years aged 41+: 20

Weeks owed: 20 × 1.5 = 30 weeks — the absolute statutory maximum. Weekly pay used: £719 (capped) Statutory redundancy: 30 × £719 = £21,570 — also the maximum.

All tax-free.

What counts as "weekly pay"

For redundancy purposes, weekly pay is your normal earnings in the 12 weeks before redundancy notice. This includes:

• Basic salary divided to weekly rate.
• Regular overtime (only if your contract obliges the employer to offer it).
• Regular bonuses you receive routinely.

It excludes:

• One-off bonuses or commissions.
• Discretionary overtime.
• Statutory Sick Pay or SMP weeks (those weeks are excluded from the average).

If your hours vary (zero-hours, variable-shift), you use the average of the 12 weeks worked. If you've been employed less than 12 weeks at the time of redundancy, you typically don't qualify anyway (need 2+ years).

Cap of £719/week — who hits it

For redundancies on or after 6 April 2025, the statutory weekly pay cap is £719. Translated to annual salary: anyone earning over ~£37,400/year has their weekly pay calculation capped.

Many redundancies in white-collar roles hit this cap — meaning the £719 figure does most of the heavy lifting in the calculation, rather than the employee's actual pay.

The cap is reviewed annually (April). Recent history:

• 2023/24: £643
• 2024/25: £700
• 2025/26: £719

The £30,000 tax-free band

The £30,000 tax-free limit applies to:

• Statutory redundancy.
• Enhanced redundancy (contractual top-up paid by employer).
• Compensation for loss of office.
• Settlement agreement payments (where genuinely compensation, not pay for past work).

The £30k limit is per redundancy, not per year. If you've had multiple redundancies in your career, each one gets its own £30k limit.

What's NOT in the £30k tax-free umbrella

These count as separate payments and are fully taxable:

• Pay in lieu of notice (PILON) — fully taxable since April 2018.
• Accrued holiday pay — fully taxable.
• Bonus or commission earned before redundancy — fully taxable.
• Garden leave pay — fully taxable.
• Pension contributions above the £60k annual allowance.

A common confusion is treating PILON as "redundancy". It isn't — it's pay you'd have received anyway, just compressed into a lump sum.

Worked example — full package

Lisa, age 45, 15 years' service, £55,000 salary (≈ £1,058/week, capped at £719 for statutory):

Statutory redundancy:

• Years aged 22-40 of her 15 years (she joined at 30): 10 years × 1 = 10 weeks
• Years aged 41-45: 5 years × 1.5 = 7.5 weeks
• Total: 17.5 weeks × £719 = £12,582.50 (tax-free)

Enhanced redundancy (her employer doubles statutory):

• 17.5 weeks × £1,058 (actual, not capped — employers can choose) = £18,515

Combined statutory + enhanced = £31,097.50

Tax treatment:

• First £30,000 tax-free.
• £1,097.50 of enhanced taxed at marginal rate (40% as she's higher-rate).
• Tax on excess: £439

PILON (3 months at full pay): £13,750 — fully taxable as employment income. Income tax + NI on PILON: ~£5,500. Net PILON: ~£8,250.

Accrued holiday (10 days): £2,115 — fully taxable. Net: ~£1,270.

Total gross to Lisa: £31,097.50 (redundancy) + £13,750 (PILON) + £2,115 (holiday) = £46,962.50

Total net (after tax): £31,097.50 - £439 (tax on excess) + £8,250 (net PILON) + £1,270 (net holiday) = £40,178

Enhanced schemes — who has them

Enhanced redundancy schemes are common in:

• Public sector (NHS, civil service, local government, teachers, police) — typically 2-3x statutory.
• Banking and financial services — generous schemes, often 3-4 weeks per year of service.
• Large multinationals — typically 1-2x statutory.
• Long-established trade-unionised employers — collective bargaining produces enhanced terms.

Enhanced typically operates as:

• Higher multiplier (e.g. 2 weeks per year instead of 1.5).
• Higher weekly cap or no cap (uses actual weekly pay).
• No 20-year limit (counts all years).
• Better age bands — sometimes drops the age-based tapering.

Check your contract and employee handbook. Many enhanced schemes are explicit; some are referenced as "the company will pay in line with policy", in which case ask HR for the policy.

Notice pay — what you're owed

Separate from redundancy, you're entitled to notice:

• Statutory minimum: 1 week's notice per complete year of service (up to 12 weeks).
• Contractual notice: often longer for senior or specialist roles — 3 months is common.

You can be required to:

• Work the notice period (normal pay throughout).
• Take garden leave (paid not to work).
• Receive PILON (a lump sum equivalent to notice pay).

All taxable as employment income.

Process — what happens in a UK redundancy

1. Selection pool defined by employer.
2. Consultation period (minimum 30 days for 20-99 redundancies, 45 days for 100+, individual consultation only required if fewer than 20).
3. At-risk notification — formal letter that your role is at risk.
4. Selection interviews / scoring — employer uses objective criteria.
5. Confirmation of redundancy — formal notice in writing.
6. Notice period — work it, garden leave, or PILON.
7. Final pay — statutory redundancy + enhanced + accrued holiday + final salary.
8. References and outplacement support (if offered).
9. 30-day window to claim unfair dismissal if you believe process was flawed.

You can also be offered suitable alternative employment during the consultation period. Refusing it without good reason can disqualify you from redundancy pay.

Income tax + NI on the taxable portion

The £30k tax-free umbrella is income-tax-free and NI-free.

Above £30k:

• Income tax: at your marginal rate (20%, 40%, 45%).
• Employee NI: 0% on the excess — Class 1A NI is paid by the employer instead (15%).
• Employer NI: 15% on the entire excess above £30k.

The employer's NI charge means redundancy packages above £30k have a real cost for the employer beyond the headline. Many employers cap enhanced offers at £30,000 specifically to avoid the NI cliff edge.

What to do with redundancy money

Common destinations:

1. Emergency fund — top up to 3-6 months expenses given the job loss.
2. Pension top-up — counts as "earnings" for purposes of pension contribution relief, very tax-efficient.
3. Pay down expensive debt — high-rate credit cards, BNPL.
4. ISA contributions — protects future returns from tax.
5. Mortgage overpayment — reduces interest cost. Check ERC limits (often 10% of balance per year).

A common ordering:

• Emergency fund first.
• Then expensive debt clearance.
• Then ISA/pension.
• Then optional mortgage overpayment.

Benefits while looking for work

You may be eligible for:

• Universal Credit — but redundancy pay over a savings threshold can disqualify or reduce.
• New Style Jobseeker's Allowance (JSA) — contributory, based on your NI record. £92.05/week for 26 weeks. Not affected by savings.
• Council Tax Support — varies by local authority.

Tip: apply for New Style JSA on day 1 — even small claims add up across 26 weeks, and there's no asset test.

Sources

• gov.uk: Redundancy: your rights
• gov.uk: Calculate your statutory redundancy pay
• HMRC: Tax on termination payments
• Employment Rights Act 1996, Section 162
• Statutory Instrument: Employment Rights (Increase of Limits) Order 2025