Facing redundancy? The law sets a floor your employer cannot go under: weeks of pay based on your age and years of service, capped at £751 a week. Work out yours, and what happens to tax if you're offered more.
Count your complete years of service, up to 20, working backwards from your dismissal date. Each year you were 41 or older earns 1.5 weeks' pay, each year from 22 to 40 earns 1 week, and each year under 22 earns half a week. Weekly pay counts only up to £751 (dismissals from 6 April 2026), so the absolute maximum is £22,530. You need at least 2 years' service to qualify at all.
Tax: the first £30,000 of a genuine redundancy payment is tax-free, which statutory pay always is, since it cannot reach £30,000. An enhanced package above £30,000 is taxed like salary on the excess, and notice pay and holiday pay are taxed in full; they are wages, not redundancy, whatever the payslip calls them.
Sources: gov.uk redundancy pay; cap per The Employment Rights (Increase of Limits) Order 2026 (£751/week from 6 April 2026). Northern Ireland sets its own cap.
Illustrative only, not legal or tax advice. England, Wales and Scotland; Northern Ireland has its own weekly cap. Assumes you are an employee with continuous service, dismissed as redundant on or after 6 April 2026, and that any package above the statutory figure is a genuine redundancy payment. Notice pay, holiday pay and PILON are separate and taxed as wages. If your employer is insolvent, the government pays statutory amounts through the Insolvency Service. Check your contract and gov.uk, and consider ACAS or a solicitor before signing a settlement agreement.
Pairs with Emergency Fund, Take-Home Pay and Bonus Tax.