Statutory Redundancy Pay Calculator UK
Calculate your statutory redundancy pay entitlement under the Employment Rights Act 1996. Model complete service years, age multipliers, discretionary severance, the £30,000 tax-free exemption under Section 401 ITEPA 2003, and clean take-home payout.
UK Statutory Redundancy Pay Calculator
Calculate your statutory redundancy entitlement, discretionary severance, tax-free £30,000 exemption, and net in-pocket payout.
Statutory redundancy uses your normal gross weekly pay, capped at £700/week.
Applies only to redundancy pay exceeding the £30,000 tax-free exemption and notice pay.
Clean take-home severance in your pocket after all PAYE deductions.
£30,000 Statutory Tax-Free Termination Exemption (ITEPA 2003 s.401)
0% Employee Class 1 NI Guarantee: Genuine redundancy and ex-gratia termination payments are completely free from employee National Insurance contributions by law—even on amounts exceeding £30,000. You pay £0.00 NI on your redundancy award.
Itemised Redundancy & Severance Breakdown
| Payment Component | Gross Amount | Tax Status | PAYE Income Tax | Employee NI | Net Take-Home |
|---|---|---|---|---|---|
| Statutory Redundancy Entitlement 10.5 statutory weeks @ £700.00/wk | £7,350.00 | Tax-Free (Under £30k) | £0.00 | £0.00 (0%) | £7,350.00 |
| Enhanced / Discretionary Severance Employer contractual / ex-gratia settlement | £10,000.00 | 100% Tax-Free | £0.00 | £0.00 (Exempt) | £10,000.00 |
| Notice Pay (PILON) & Holiday Pay Contractual earnings (Section 402B ITEPA 2003) | £3,000.00 | Fully Taxable | -£600.00 | -£240.00 | £2,160.00 |
| Total Redundancy & Severance Package | £20,350.00 | £17,350.00 tax-free | -£600.00 | -£240.00 | £19,510.00 |
Statutory Service Multiplier Breakdown (ERA 1996 s.162)
Calculated backwards from termination date across your 8 counted years.
= 7.5 weeks (£5,250.00)
= 3 weeks (£2,100.00)
= 0 weeks (£0.00)
Tax Planning Tip: Pension Sacrifice on Severance Over £30,000
If your total termination package exceeds the £30,000 statutory tax-free exemption, you can ask your employer to pay some or all of the taxable excess directly into your workplace pension or SIPP before your contract ends.
This legally avoids the 40% or 45% PAYE income tax deduction, preserves your annual personal allowance, and your employer may also pass on the 15% employer Class 1 secondary National Insurance savings as a pension top-up. Subject to your remaining £60,000 annual pension allowance.
How UK Statutory Redundancy Pay Is Calculated (ERA 1996 s.162)
In the United Kingdom, employees who are made redundant are legally entitled to statutory redundancy pay provided they satisfy the qualifying service requirements set out under the Employment Rights Act 1996 (ERA 1996).
To qualify for statutory redundancy pay under Section 155 of the ERA 1996, you must have been continuously employed by your employer for at least two complete years. Part-time employees and fixed-term workers enjoy identical statutory protection to full-time permanent staff.
The Three Statutory Age Multipliers (Section 162 ERA 1996)
Statutory redundancy pay is reckoned by working backwards from your termination date across up to 20 years of continuous service:
- 0.5 week's pay for each complete continuous year of employment in which you were under the age of 22.
- 1.0 week's pay for each complete continuous year of employment in which you were aged 22 to 40.
- 1.5 weeks' pay for each complete continuous year of employment in which you were aged 41 or older.
Under Section 227 ERA 1996, normal weekly pay is capped at £700/week for 2026/27. Any salary above £700 is disregarded for statutory entitlement.
Reckoning a maximum of 20 years at the top 1.5x multiplier yields 30 statutory weeks: 30 × £700 = £21,000 statutory limit.
The £30,000 Tax-Free Exemption (Section 401 ITEPA 2003)
Taxation of severance awards in the UK is governed by Section 401 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). Under this legislation, the first £30,000 of qualifying termination payments is 100% exempt from Income Tax.
This £30,000 exemption applies to the combined sum of your statutory redundancy pay and any enhanced ex-gratia compensation or discretionary redundancy package agreed with your employer in a settlement agreement.
Unlike standard employment wages, genuine termination compensation is completely legally exempt from employee Class 1 National Insurance contributions—even on amounts that exceed £30,000! While employers pay 15% employer Class 1A NICs on termination awards over £30,000, employees pay £0.00 NI on their redundancy pay.
If your total qualifying severance package exceeds £30,000, only the excess amount above £30,000 is subject to Income Tax at your marginal PAYE rate:
- Basic Rate (20%) if your total taxable earnings for the tax year remain under £50,270.
- Higher Rate (40%) if your taxable earnings and severance excess fall between £50,271 and £125,140.
- Additional Rate (45%) on taxable earnings exceeding £125,140.
Contractual Earnings: Notice Pay (PILON) & Holiday Pay
It is critical not to confuse severance compensation with contractual earnings. Following the Post-Employment Notice Pay (PENP) statutory rules introduced in Section 402B ITEPA 2003, the tax treatment differs fundamentally between compensation for loss of office and contractual pay.
Regardless of whether your employer calls it a "settlement sum", HMRC requires contractual notice pay to be separated and taxed through standard PAYE before applying the £30,000 exemption to remainder compensation.
Worked Case Study: Estimating a £47,400 Severance Package
To illustrate how statutory multipliers, discretionary severance, and notice pay interact, examine this practical example:
Employee Profile: Age 48, with 10 complete years of continuous service.
Remuneration: £44,200 annual gross salary (£850/week).
Package Terms: Statutory redundancy + £25,000 enhanced severance + £4,000 PILON.
1. Statutory Redundancy Calculation (ERA 1996 s.162):
- Weekly pay is capped at the statutory limit: £700/week (not £850).
- Service years 1 to 5 (ages 44 to 48): 5 years × 1.5 = 7.5 weeks.
- Service years 6 to 10 (ages 39 to 43): 3 years at 41+ (4.5 wks) + 2 years at 22–40 (2.0 wks) = 6.5 weeks.
- Total statutory entitlement: 14.0 weeks × £700 = £9,800.
2. Section 401 Exemption & Tax Deductions:
- Total qualifying severance = £9,800 statutory + £25,000 enhanced = £34,800.
- Tax-free portion under Section 401: £30,000.
- Taxable severance excess: £34,800 − £30,000 = £4,800.
- Income tax on severance (40% Higher Rate): £4,800 × 40% = £1,920.
- Employee NI on severance: £0.00 (exempt by law).
3. Notice Pay (PILON) Deductions:
- PILON gross amount: £4,000.
- Income tax at 40%: £1,600.
- Employee NI at 2%: £80.
- Net PILON take-home: £4,000 − £1,680 = £2,320.
Tax-Efficient Strategies: Pension Sacrifice on Severance
If your redundancy package exceeds the £30,000 statutory tax-free exemption, you face paying 40% or 45% PAYE income tax on the excess amount. Furthermore, a substantial termination payment can push your total Adjusted Net Income over £100,000, triggering the punishing 60% marginal tax trap through the tapering of your Personal Allowance.
How Redundancy Pension Sacrifice Works
Before signing your settlement agreement or leaving service, you can agree with your employer to direct some or all of the taxable redundancy excess (above £30,000) into your workplace pension scheme or personal SIPP as an employer contribution.
Planning Your Post-Redundancy Finances
Transitioning after redundancy requires careful payslip and tax management. Forecast your expected take-home income in your next role, verify whether your final termination payslip was overtaxed on an emergency code, and review your tax code.
Frequently Asked Questions About UK Redundancy Pay
Frequently Asked Questions
Clear answers based on official HMRC rules and statutory guidance.
Statutory Authorities & Official References
Statutory redundancy calculations and tax treatments are governed by primary UK parliamentary legislation:
- Employment Rights Act 1996 (ERA 1996), Section 162 — Statutory calculation of redundancy payments and age multipliers.
- Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), Section 401 — Payments and benefits on termination of employment (£30,000 exemption).
- Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), Section 402B — Post-Employment Notice Pay (PENP) and contractual earnings rules.
- GOV.UK Statutory Redundancy Pay Guidance — Official UK government rates and limits.
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Separate the payment types
Statutory redundancy pay depends on age, complete years of service, weekly-pay limits and the termination date. Pay in lieu of notice and holiday pay are different payment types.
The £30,000 exemption is not a blanket exemption for all money paid on leaving a job. Contractual entitlement, PENP and employer NI can require specialist review.
Check the rules for your circumstances
Official guidance supports the rules described here; it does not approve or certify this calculator. Confirm dates, eligibility and unsupported cases before making a financial decision.