Redundancy pay calculator
Your statutory entitlement is only the start of a redundancy package. This works out the age-banded statutory pay, adds notice and holiday pay, and — the part most calculators skip — shows what the whole package is worth after tax, including the £30,000 tax-free rule.
Your redundancy
The rest of the package
The package, piece by piece
Statutory redundancy pay: the formula in 2026/27
Statutory redundancy pay needs two years of service, then counts backwards through your employment: one and a half weeks' pay for each year worked from age 41, one week for years between 22 and 40, half a week below that, capped at 20 years of service. The week's pay itself is capped at £751 for dismissals from 6 April 2026, whatever you actually earn, which makes the absolute maximum 30 weeks times £751: £22,530. Written as a formula, statutory redundancy pay = your age-banded weeks × the lower of your actual weekly pay and £751. That cap started at £40 in 1965, when it covered twice the average wage; the full history of the cap is a story of quiet shrinkage. Northern Ireland runs its own, higher cap.
The package is bigger than the statutory bit
Take the default example above: 45 years old, ten years of service, £800 a week. The age bands give 12 weeks, and because £800 exceeds the cap, each counts as £751: £9,012 of statutory pay. Then the rest of the package arrives. Notice pay and untaken holiday are taxed as ordinary earnings, with PILON treated that way by law since 2018 however the paperwork describes it. Enhanced redundancy from your employer stacks on top of the statutory figure. On this example the £13,312 package loses only £987 to tax and NI, and £12,325 lands in your account.
The £30,000 rule, and the pension move
The first £30,000 of genuine termination pay, statutory plus any ex-gratia enhancement, is completely free of income tax, and no employee National Insurance is due on termination pay at any amount. Only the excess above £30,000 meets income tax, at your marginal rate on top of your salary for the year. That creates one high-value manoeuvre: if your package clears £30,000, asking your employer to pay some of the excess directly into your pension avoids the tax on it entirely, and it needs agreeing before the settlement is signed, not after. The sacrifice optimiser shows what the redirected money is worth, and the take-home pay calculator helps plan the months after the cheque clears.
Common questions
How is statutory redundancy pay calculated?
You get half a week’s pay for each full year worked while under 22, one week for each year between 22 and 40, and one and a half weeks for each year at 41 or older — counting back from your redundancy date, with service capped at 20 years. Weekly pay is capped at £751 for redundancies from 6 April 2026 (higher in Northern Ireland), making the maximum statutory payment £22,530. You need at least two full years’ service to qualify.
Is redundancy pay tax-free?
The first £30,000 of genuine termination pay — statutory redundancy plus any ex-gratia amount — is completely tax-free, and no employee National Insurance is due on termination pay even above that. The excess over £30,000 is taxed as income at your marginal rate. Notice pay (PILON) and holiday pay are different: they are always taxed as normal earnings, whatever the paperwork calls them.
Can I reduce the tax on a redundancy package?
The main lever is asking your employer to pay some of the amount above £30,000 directly into your pension instead of as cash — an employer contribution avoids income tax on it entirely, subject to your £60,000 annual allowance plus any carry-forward. Agree it before the settlement agreement is signed; it cannot be undone afterwards.
What about my notice period and unused holiday?
You are entitled to work your notice or be paid in lieu of it (PILON), and to be paid for accrued untaken holiday — both on top of redundancy pay, and both taxed as ordinary salary. Statutory notice runs from one week after a month’s service up to 12 weeks after 12 years.
These results are estimates for general information only and are not financial advice. Redundancy terms, notice entitlements and settlement agreements vary — confirm your own figures with your employer, ACAS or an adviser before making decisions. Read the full disclaimer.