UK Statutory Redundancy Pay & Settlement Agreement Tax Calculator
Calculate your statutory redundancy pay entitlement under UK employment law, assess ex-gratia payments, and calculate tax/NI obligations for settlement agreements including the £30,000 tax-free exemption under Section 401 ITEPA 2003 and PILON rules.
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About this Calculator & Calculation Methodology
Sourced from official His Majesty's Revenue and Customs (HMRC) regulations
Statutory Redundancy Pay (Employment Rights Act 1996): Minimum 2 years continuous service required (max 20 years counted).
Weekly pay capped at £700/week (2026 cap).
Multiplier by age: 0.5 week per year worked under age 22; 1.0 week per year worked aged 22–40; 1.5 weeks per year worked aged 41+.
Maximum statutory payout = 30 weeks × £700 = £21,000.
Section 401 ITEPA 2003 Exemption: Statutory redundancy and enhanced ex-gratia payments are 100% tax-free up to £30,000.
Excess over £30,000 is subject to Income Tax.
PILON (Pay in Lieu of Notice) is 100% taxable earnings under PAYE.
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Frequently Asked Questions
What is the statutory redundancy pay formula for 2026?
To qualify, you must have at least 2 full years of continuous service. Your weekly pay is statutorily capped at £700 per week, and a maximum of 20 years of service is counted. You receive: 0.5 week's pay for each year worked under age 22; 1 week's pay for each year worked aged 22 to 40; and 1.5 weeks' pay for each year worked aged 41 or over. The maximum statutory redundancy payment is £21,000.
Is redundancy pay tax-free in the UK?
Under Section 401 ITEPA 2003, statutory redundancy pay and genuine ex-gratia severance payments are tax-free up to £30,000. Any severance amount exceeding £30,000 is subject to Income Tax at your marginal rate, but remains exempt from Employee National Insurance.
Is Pay in Lieu of Notice (PILON) taxable?
Yes. Pay in Lieu of Notice (PILON) and accrued holiday pay are classified as Post-Employment Notice Pay (PENP) and standard earnings, making them fully subject to PAYE Income Tax and Employee National Insurance.
Do I qualify for redundancy pay if I have worked less than 2 years?
Under UK employment law, employees with less than 2 years of continuous service have no statutory entitlement to redundancy pay, though your employment contract or settlement agreement may offer contractual severance.
Disclaimer: Results are estimates based on standard tax rules for the 2026 tax year and are provided for informational purposes only. Individual circumstances (deductions, credits, specific state/local rules) may significantly affect your actual tax liability. Always consult a qualified tax professional or accountant for advice specific to your situation.