Guide · Personal Finance
Redundancy Pay in the UK: How Much You're Entitled To
If your job is at risk, knowing how redundancy pay is calculated — and how it's taxed — helps you check what you're offered and plan your next move.
Who Qualifies, and for How Much
To qualify for statutory redundancy pay in the UK, you need at least 2 years of continuous service with your employer, and your role must be genuinely redundant (the job itself is disappearing, not just you). The amount is based on three things: your age, your length of service, and your weekly pay.
The government counts back from your last working day, one year at a time, and assigns each complete year of service a multiplier based on how old you were during that year:
| Age During That Year | Week's Pay per Year of Service |
|---|---|
| Under 22 | 0.5 weeks |
| 22 to 40 | 1.0 week |
| 41 and over | 1.5 weeks |
Only the most recent 20 years of service count, and your weekly pay is capped at a statutory maximum that's reviewed every April — even high earners only get credit for pay up to that cap.
A Worked Example
Take someone who is 45 years old with 12 years of service and a weekly pay above the statutory cap. Working backwards from age 45, the most recent years fall in the 41+ band (1.5 weeks each), and the earliest years — when they were younger — fall in the 22–40 band (1 week each).
Tax on Redundancy Pay
The first £30,000 of a genuine redundancy payment — statutory plus any contractual or ex-gratia top-up — is free of income tax and National Insurance. Anything above £30,000 is taxed as income in the year you receive it, so a large lump sum can temporarily push you into a higher tax bracket.
Notice pay, holiday pay, and any bonus owed are usually taxed separately as normal income — they don't count towards the £30,000 redundancy allowance.
Checking a Settlement Agreement
If your employer offers an enhanced package alongside a settlement agreement, check it covers at least the statutory minimum, clarify which elements (if any) sit outside the £30,000 tax-free band, and confirm whether you're expected to get independent legal advice — a common condition for the agreement to be valid.
Frequently asked questions
How long do I need to have worked somewhere to qualify?
You need at least 2 years of continuous service with the same employer to qualify for statutory redundancy pay. Continuous service is broken by gaps, but not usually by internal transfers within the same group of companies.
Does the statutory formula use my actual salary?
Only up to a cap. The government sets a maximum weekly pay figure each year (reviewed every April) — even if you earn more, the statutory calculation uses the lower of your actual weekly pay and that cap.
What's the difference between statutory and contractual redundancy pay?
Statutory redundancy pay is the legal minimum. Many employers offer a more generous contractual or ex-gratia scheme on top — sometimes a multiple of statutory pay, or a flat number of weeks per year of service.
Do I pay tax on redundancy pay?
The first £30,000 of a genuine redundancy payment is free of income tax and National Insurance. Anything above that is taxed as income in the tax year you receive it, which can push you into a higher tax band for that year.