How is statutory redundancy pay calculated?

Statutory redundancy pay is based on your age, complete years of service (capped at 20), and weekly gross pay (capped at £740 in 2026/27). You receive: 0.5 week's pay per year of service under age 22; 1 week's pay per year aged 22–40; and 1.5 weeks' pay per year aged 41 or over. The calculation works backwards from your last day, applying the age rate you were during each year of service.

Is redundancy pay taxable in the UK?

Statutory redundancy pay is tax-free. Any redundancy payment — statutory or enhanced — up to £30,000 total is exempt from income tax and National Insurance. Payments above £30,000 are subject to income tax (but not NI) on the excess. Payments in lieu of notice (PILONs) are always taxable regardless of amount.

What is the weekly pay cap for redundancy in 2026/27?

The statutory weekly pay cap for redundancy calculations in 2026/27 is approximately £740. This means even if your weekly gross pay exceeds £740, only £740 is used in the calculation. The cap is reviewed annually each April.

How many years of service count for redundancy pay?

A maximum of 20 complete years of service are counted for statutory redundancy pay. Only complete years count — for example, 6 years and 9 months counts as 6 years. Your employer may offer enhanced redundancy that counts all years or uses a different formula.

What is the maximum statutory redundancy pay in 2026/27?

The maximum statutory redundancy pay in 2026/27 is approximately £22,200. This is achieved with 20 years of service, all at or after age 41, at the £740 weekly pay cap (20 × 1.5 × £740 = £22,200). Most people receive significantly less than the maximum.

Redundancy Pay Calculator UK 2026/27 — Statutory & Enhanced

Your Details

Your age on your last day of employment Enter your age in complete years

Complete years of service Only complete years count — e.g. 6 yrs 9 months = 6

Weekly gross pay Your basic weekly pay before tax — max £740 applies

Enhanced pay multiplier Leave at 1.0 for statutory only; enter e.g. 1.5 if employer pays 1.5× statutory

Total redundancy payment

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Based on your inputs

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Statutory amount

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Week's pay equivalent

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Capped weekly pay used

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Years counted

Tax-free: Your total redundancy payment is below £30,000 and is exempt from income tax and National Insurance. You receive the full amount with no deductions.

Calculation Breakdown

Year(s)	Age during year	Rate	Weeks earned

Calculation works backwards from your most recent year of service. Weekly pay used: —.

How Statutory Redundancy Pay is Calculated

Statutory redundancy pay is calculated using your age, complete years of continuous service with your employer (up to 20), and your average weekly gross pay (capped at £740 in 2026/27).

The rate per year depends on your age during each year of service, working backwards from your last day:

Your age during that year of service	Weeks' pay per year
Under 22	½ week's pay
22 to 40	1 week's pay
41 or over	1½ weeks' pay

The calculation goes backwards through your years of service using the age you were at each point. Only complete years count — months are ignored. Your employer must pay at least the statutory amount; many pay more under enhanced redundancy schemes.

Tax on Redundancy Pay

Statutory redundancy pay is always tax-free. Combined statutory and enhanced redundancy payments are tax-free up to a total of £30,000. Any amount above £30,000 is taxed as income in the year you receive it (at your normal marginal rate) but is not subject to National Insurance contributions.

Payments in lieu of notice (PILONs) are always taxed as employment income regardless of amount — they are not part of the £30,000 exemption. Ensure your employer clearly separates any PILON from your redundancy payment in your settlement documentation.

If your total termination payment (including any ex-gratia amounts) exceeds £30,000, you will need to declare the excess on a Self Assessment tax return if you do not normally file one.

What Counts as a Week's Pay?

For redundancy purposes, a week's pay is typically your basic gross weekly pay — not including overtime, commission or bonuses unless they are contractually guaranteed. If you work variable hours, HMRC averages your weekly pay over the 12 weeks before your redundancy notice was given.

The statutory weekly pay cap for 2026/27 is approximately £740. This cap is reviewed every April. If you earn more than £740/week, only £740 is used in the calculation — but your employer's enhanced scheme may use your actual pay instead.

Frequently Asked Questions

You qualify if you have been continuously employed for at least 2 years and you are being made redundant (not dismissed for conduct or performance). The 2-year qualifying period must be with the same employer. Agency workers, self-employed individuals and workers on fixed-term contracts under 2 years generally do not qualify.

No. Statutory redundancy pay is a legal minimum. Your employer cannot pay less. They can offer more — many larger employers have enhanced redundancy schemes that pay multiples of statutory pay. Any agreement to accept less than the statutory amount is not legally enforceable.

If your employer refuses to pay your statutory redundancy entitlement, you can apply to an Employment Tribunal within 6 months of your redundancy date. If your employer is insolvent, the Redundancy Payments Service (part of the Insolvency Service) can pay statutory redundancy directly from the National Insurance Fund.

Redundancy pay is treated as capital for Universal Credit purposes. If your total savings (including your redundancy payment) exceed £6,000, your UC award is reduced by £4.35/month for every £250 above that threshold. If your savings exceed £16,000, you are ineligible for UC entirely until they fall below that level. It may be worth taking independent advice on timing and how to use your redundancy payment.

Yes — and this can be very tax-efficient. Contributions from redundancy pay into a pension are eligible for tax relief in the usual way. The annual allowance (£60,000 in 2026/27) applies, but if you have unused allowance from the previous three tax years, you can carry it forward. A higher-rate taxpayer putting a redundancy payment into their pension effectively claims 40% relief on the contribution.