UK Redundancy Payment Calculator (2026)

Post-Employment Notice Pay (PENP) is the basic pay your employer provides for a period of notice that you do not work. Under section 402D of ITEPA 2003, PENP is treated as earnings from employment, so it is taxed through PAYE as Income Tax and attracts Class 1 National Insurance contributions in the same way as normal pay. Genuine redundancy payments are treated differently: statutory redundancy pay and contractual redundancy pay remain free of Income Tax up to a combined limit of £30,000, and they are not subject to National Insurance contributions. Only the part of a termination package that exceeds this limit is taxable as earnings. In practice, PENP and redundancy pay often arrive in the same termination payment, so you should ask your employer for an itemised breakdown. Check that the basic pay for unworked notice is shown separately from the genuine redundancy element, and remember that if you are required to work your notice, no PENP arises at all.

A legal minimum payment your employer must make when your role is genuinely redundant (not dismissal). You need at least 2 years of continuous service. Calculation: age-banded multiplier × weekly gross pay (capped at £719 from April 2025) × years of service (capped at 20). Age multipliers: under 22 = 0.5 weeks/year; 22 to 40 = 1.0; 41+ = 1.5. A 50-year-old with 12 years' service earning £719+/week gets: (9 × 1.5 + 3 × 1.0) × £719 = £11,863.50.

Statutory redundancy pay caps weekly earnings at £719 (from 6 April 2025, up from £700 the year before). So a £1,500/week earner still only counts at £719/week for statutory purposes. The cap is reviewed annually in line with Average Weekly Earnings data from ONS. Many employers pay above statutory: this is called enhanced redundancy.

A voluntary employer top-up above statutory minimum. Typical UK enhanced packages: public sector 3 to 4 weeks per year; financial services 3.5 to 5; technology 2.5 to 4; retail 1 to 2.5. Usually specified in the contract, union agreement, or offered as part of a settlement agreement. Around 70% of UK redundancies involve some enhancement; public sector is highest at approximately 85% prevalence. Enhanced packages are tax-free up to £30k (combined with statutory) but taxable above.

The first £30,000 of genuine redundancy payment is free of income tax and NI: a long-standing UK concession. This covers statutory plus any enhancement, plus ex-gratia goodwill payments. Above £30,000, income tax applies at your marginal rate (20/40/45% or Scottish equivalent). NI (employee and employer) does not apply above £30k, making this one of the most tax-advantaged forms of income in the UK system.

Settlement agreements waive your right to sue (unfair dismissal, discrimination) in exchange for an agreed sum, typically 3 to 12 months' salary in total. You must have independent legal guidance (the employer typically contributes £500 to £750). Review points: (1) Is the total more than statutory? (2) Are references agreed? (3) Any confidentiality or non-disparagement clauses you can live with? (4) Is the tax treatment maximised (bonus in ex-gratia, not PENP)? (5) Outplacement support included?

Yes: statutory redundancy is triggered by the redundancy event, not by unemployment. You keep the full statutory sum even if you start a new job the next day. Many employers offer trial period arrangements allowing you to test a new role within the same group without losing redundancy rights. Union-negotiated agreements often extend this.

The Redundancy Payments Service (via Insolvency Service) pays statutory redundancy, arrears of pay (up to 8 weeks), holiday pay (up to 6 weeks) and notice pay if your employer is insolvent. The week's pay cap of £719 applies (so maximum statutory redundancy is £21,570). Claim via gov.uk/claim-redundancy. Processing typically takes 6 to 12 weeks post-insolvency confirmation.

Partially: the tool applies UK-wide income tax bands for simplicity (20%/40%/45%). Scottish residents pay slightly different rates (21% intermediate, 42% higher, 48% top) on the taxable portion above £30k. For precise Scottish figures, subtract additional 2% on higher-rate and 3% on additional-rate portions. HMRC's Scottish tax variation does not apply to NI or the £30k free band.