Redundancy pay and the £30,000 tax-free amount
The short answer
After two years with an employer you're entitled to statutory redundancy pay: up to 1.5 weeks' pay for each full year of service, depending on your age, with a week's pay capped at £751 and service capped at 20 years. The most anyone can get is £22,530 in England, Scotland and Wales, and £23,490 in Northern Ireland. The first £30,000 of redundancy pay is free of tax and National Insurance, but notice pay, holiday pay and wages owed are taxed as normal pay.
How statutory redundancy pay is worked out
Count your full years of service, working back from the date your job ends. Each year earns a number of weeks' pay, depending on how old you were during it:
| Your age during the year | Weeks' pay for that year |
|---|---|
| Under 22 | Half a week |
| 22 to 40 | One week |
| 41 and over | One and a half weeks |
A week's pay is your average over the 12 weeks before you were given notice, before tax, up to a maximum of £751 for redundancies from 6 April 2026. In Northern Ireland the cap is £783. Only the most recent 20 years count.
Worked example
Priya is 45 and has worked for her employer for 12 full years. She earns £900 a week, so the £751 cap applies.
Four of those years were after her 41st birthday, at 1.5 weeks each (6 weeks). The other eight were between 33 and 40, at one week each (8 weeks). That's 14 weeks, so her statutory redundancy pay is 14 × £751 = £10,514.
Her employer offers an enhanced package: £25,000 on top, plus 12 weeks' pay in lieu of notice and five days of unused holiday.
| Part of the payout | Amount | How it's taxed |
|---|---|---|
| Statutory and enhanced redundancy pay | £35,514 | First £30,000 free; £5,514 taxed, no NI |
| Pay in lieu of 12 weeks' notice | £10,800 | Tax and NI, like salary |
| Five days' unused holiday | £900 | Tax and NI, like salary |
What's tax-free, and what isn't
Tax-free up to £30,000 in total: statutory redundancy pay, any enhanced or extra redundancy payment, and non-cash benefits such as a company laptop you keep. Above £30,000 you pay Income Tax, but no employee National Insurance. Your employer pays its own National Insurance on the excess.
Taxed like normal pay: wages owed, holiday pay, bonuses, and pay in place of working your notice, whether it's called pay in lieu of notice or not. If you don't work your notice, the pay you'd have earned in that time is taxed as earnings.
Not taxed at all: payments for an injury or disability that means you can't do your job, and legal fees your employer pays directly to your solicitor as part of a settlement.
Paying some into a pension
If your payout goes over £30,000, you may be able to ask your employer to pay some of it into your pension instead. Employer contributions from a payout aren't subject to tax or National Insurance, up to your annual allowance (£60,000 for most people, including other contributions that year). For Priya, putting the £5,514 above the limit into her pension would mean no tax on any of her redundancy pay. Your employer has to agree, and it's best arranged before the payment is made.
Your notice
Your employer also has to give you at least the statutory minimum notice: one week if you've worked there between a month and two years, one week for each full year between 2 and 12 years, and 12 weeks after that. Your contract may give you more. Notice is paid at your normal rate, not capped like redundancy pay.
If your employer doesn't pay what you're owed, you normally have six months from the end of your job to make a claim. Talk to Acas first (the Labour Relations Agency in Northern Ireland). Both offer free early conciliation.
If your employer has gone out of business and can't pay, you can claim statutory redundancy pay from the government's Redundancy Payments Service instead. And if you unreasonably turn down a suitable alternative job your employer offers, you can lose the right to redundancy pay altogether.
Work it out with your own figures
Work out your statutory redundancy pay, your notice, and the tax on a full package.
Open the Redundancy Pay CalculatorNext step: see what putting part of it into your pension could grow to.