Being made redundant is stressful enough without confusion over what you are owed. The good news is that statutory redundancy pay follows a fixed formula — once you know your age, length of service and weekly pay, the amount is set in law. Many people are also owed notice pay and holiday pay on top, which they forget to claim. Here is exactly how redundancy pay works in 2025/26.
- You need at least two years' service to qualify for statutory redundancy pay.
- The amount is age-banded: 0.5, 1 or 1.5 weeks' pay per year of service.
- A week's pay is capped at £719, and only the last 20 years count.
- Redundancy pay is tax-free up to £30,000 — and notice and holiday pay are separate.
Who qualifies
To get statutory redundancy pay you must be an employee with at least two years' continuous service, and your role must be genuinely redundant — the work has stopped or reduced. Contractors, most agency workers and those dismissed for other reasons don't qualify for the statutory payment, though they may have other rights.
The age-banded formula
For each full year of service, you get a set number of weeks' pay depending on your age during that year:
| Age during the year | Weeks' pay per year |
|---|---|
| Under 22 | 0.5 week |
| 22 to 40 | 1 week |
| 41 or older | 1.5 weeks |
Two caps apply: only your last 20 years of service count, and a week's pay is capped at £719 (from 6 April 2025), even if you earn more. The redundancy pay calculator walks back through your service year by year and totals it.
Worked example
Take someone aged 45 with 12 years' service earning £600 a week. The most recent years fall in the 41+ band (1.5 weeks each) and earlier years in the 22–40 band (1 week each). Their weekly pay of £600 is within the £719 cap. Walking back the 12 years gives a total number of weeks, multiplied by £600 — a four-figure sum, all tax-free as it's well under £30,000.
The £30,000 tax-free rule
Statutory and most enhanced redundancy pay is free of income tax and National Insurance up to £30,000. Anything above that is taxed as earnings through PAYE.
Payment in lieu of notice is taxed One catch: payment in lieu of notice (PILON) — money instead of working your notice — is always taxable, even within the £30,000 band. Don't assume your whole package is tax-free; check which parts are genuine redundancy and which are taxable notice or bonus payments.
What else you're owed
Redundancy pay is not the only money on the table. Separately, you are entitled to:
- Statutory notice pay — at least one week per year of service, capped at 12 weeks.
- Accrued holiday pay — any unused holiday must be paid in your final pay.
- Any contractual enhanced redundancy — many employers offer more than the statutory minimum; read your contract and any collective agreement.
If you'll be out of work, check what support you can claim with the Universal Credit calculator — and remember statutory redundancy doesn't count as earnings for UC.
Frequently asked questions
By a fixed formula: 0.5, 1 or 1.5 weeks' pay for each full year of service depending on your age that year, with a week's pay capped at £719 and a maximum of 20 years counted.
Statutory and enhanced redundancy pay is tax-free up to £30,000. Above that it is taxed as income. Payment in lieu of notice is always taxable.
At least two years' continuous service with the same employer to qualify for statutory redundancy pay.
Yes. Statutory notice pay (one week per year, up to 12) and accrued holiday pay are paid on top of redundancy pay.
Many employers offer enhanced redundancy above the statutory minimum. The tax-free £30,000 limit still applies to the redundancy element.
Figures are 2025/26 estimates for Great Britain. Treat them as a guide and seek advice if your situation is complex or you suspect unfair selection.