UK Statutory Redundancy Pay Calculator & £30,000 Tax Rule Guide 2026

1. Who Qualifies for Statutory Redundancy Pay?

An employee will normally qualify for statutory redundancy pay if they are an employee, have been continuously employed by their employer for at least 2 years, and are dismissed because of genuine redundancy. Redundancy has a specific legal meaning. It generally involves circumstances such as the employer closing the business or workplace, or the employer having a reduced need for employees to carry out work of a particular kind.

2. Statutory Redundancy Pay Calculation Formula

Statutory redundancy pay is calculated using three factors: age during each completed year of service, the number of complete years of service, and the employee's relevant weekly pay. The statutory calculation counts a maximum of 20 years of service.

3. 2026 Statutory Weekly Pay Cap

For redundancies taking effect on or after 6 April 2026, the statutory maximum amount of a week's pay used in the calculation is £751. The maximum statutory redundancy payment is therefore £22,530, calculated as 20 years × 1.5 weeks × £751. For redundancies before 6 April 2026, the previous £719 weekly limit applies.

4. Worked Redundancy Pay Examples

The age multiplier applies to each completed year according to the employee's age during that year. Therefore, an employee whose age crosses 22 or 41 during their employment may have different multipliers for different years. Example 1: An employee aged 45 with 10 complete years of service, all worked from age 41 or later, has 10 × 1.5 = 15 weeks of statutory pay. If their actual weekly pay is £900, the statutory calculation uses the £751 cap, giving £11,265. Example 2: An employee aged 35 with 10 complete years of service, all worked between ages 25 and 34, has 10 × 1 = 10 weeks. If weekly pay is £600, statutory redundancy pay is £6,000. Example 3: An employee with 25 years of service cannot count all 25 years. The service is capped at 20 years, and the relevant age multipliers still have to be applied to the qualifying complete years.

5. The £30,000 Tax Rule for Redundancy and Termination Payments

The £30,000 rule applies to qualifying termination payments rather than simply creating a blanket £30,000 exemption for every payment made when employment ends. The first combined £30,000 of qualifying statutory redundancy pay, enhanced redundancy payments and other qualifying termination awards is generally not subject to Income Tax. Amounts above the combined £30,000 threshold are generally subject to Income Tax. The employer is also liable for Class 1A National Insurance on relevant termination awards above £30,000.

6. Notice Pay Is Separate From the £30,000 Redundancy Exemption

Notice pay is normally taxable earnings and is not simply added to the tax-free redundancy allowance. If an employer makes a payment instead of requiring the employee to work their notice, Post-Employment Notice Pay (PENP) rules can apply. Relevant notice pay is subject to Income Tax and National Insurance and does not receive the £30,000 termination-payment exemption.

7. Redundancy Consultation and Fair Selection

An employer should follow a fair redundancy process. Individual consultation should normally explain why redundancy is proposed, discuss alternatives, consider the employee's circumstances and allow the employee to respond. Where an employer is proposing 20 or more redundancies at one establishment within a 90-day period, collective consultation rules can apply. The employer may have additional obligations concerning employee representatives, consultation periods and notification to the government.

8. Statutory Notice Pay and Redundancy Pay Are Different

Statutory redundancy pay compensates eligible employees for redundancy and is calculated using age, complete years of service and capped weekly pay. Statutory notice is a separate entitlement. Employees are generally entitled to at least 1 week's notice for each complete year employed, subject to a maximum statutory notice period of 12 weeks. The employment contract may provide a longer notice period.

9. Suitable Alternative Employment

An employer may offer an employee suitable alternative employment instead of ending the employment relationship. Whether alternative employment is suitable depends on factors such as the work, pay, location, status and other relevant circumstances. If an employee accepts suitable alternative employment with the same employer or an associated employer, a statutory 4-week trial period normally applies. Rejecting suitable alternative work without a valid reason can affect redundancy pay entitlement, so the circumstances should be assessed carefully.

10. What Happens If the Employer Becomes Insolvent?

If an employer is insolvent and cannot pay amounts owed, eligible employees can apply to the Insolvency Service for certain redundancy and employment-related payments. The government-backed claim system has statutory limits. For redundancies on or after 6 April 2026, the weekly cap used for relevant statutory payments is £751. The Insolvency Service can also apply separate limits to the number of weeks or type of payment that can be claimed.

11. Redundancy Pay and National Insurance

Genuine statutory redundancy payments are not normally treated as ordinary earnings for employee Class 1 National Insurance purposes. However, the tax and National Insurance treatment of a termination package depends on what each component represents. Amounts such as salary, holiday pay and qualifying notice pay can be taxable and subject to National Insurance. Relevant termination awards above £30,000 can create an employer Class 1A National Insurance liability.

12. When the £30,000 Rule Does Not Apply

Not every payment made when an employee leaves qualifies for the £30,000 exemption. Payments that represent ordinary earnings or contractual entitlements can be taxable as employment income. Examples include unpaid wages, bonuses, accrued holiday pay and relevant payment in lieu of notice. These should not be incorrectly presented as tax-free redundancy payments.

13. Statutory Redundancy Pay vs Contractual Redundancy Pay

Statutory redundancy pay is the legal minimum for eligible employees. An employer can provide a contractual or enhanced redundancy scheme offering more than the statutory amount. The contractual scheme may use a different formula, but the tax treatment still needs to distinguish genuine qualifying termination awards from ordinary earnings and notice-related payments.

14. Common Redundancy Pay Mistakes

The most common errors are treating the £30,000 figure as a universal tax-free allowance, using an outdated weekly pay cap, applying one age multiplier to an employee's entire service without considering age during each completed year, and treating notice pay as tax-free redundancy pay.

15. Practical 2026 Redundancy Checklist

Before accepting a redundancy settlement, check the proposed termination date, length of continuous service, age during each complete year, weekly pay used in the statutory calculation, contractual redundancy entitlement, notice/PENP, accrued holiday pay and the tax treatment of each payment. If the employer is insolvent, use the Insolvency Service claim process and check the applicable statutory caps.

Frequently Asked Questions (6 Interlinked FAQs)

Official Government & Statutory References

• • GOV.UK Statutory Redundancy Pay
• • GOV.UK Tax on Termination Payments
• • GOV.UK Redundancy Rights
• • ACAS Redundancy Guidance
• • GOV.UK Insolvency Service Redundancy Payments

Related UK Employment & Pension Guides