Made Redundant — What to Do Financially (UK Guide 2026)

Being made redundant is disorienting — but you have legal rights, financial entitlements, and more options than most people realise in the immediate aftermath. Working through the practical steps quickly gives you the best chance of financial stability while you find what’s next.

Step 1: Understand What You’re Owed

Before anything else, confirm all the elements of your redundancy package:

Statutory Redundancy Pay (SRP)

You’re entitled to SRP if you’ve worked for your employer for at least 2 years. The statutory amount is calculated as:

• Maximum years of service counted: 20 years
• Weekly pay is capped at £643 (2026/27 rate, updated April 2026)
• The maximum statutory payment is therefore £19,290 (1.5 × 20 × £643)

Example: Aged 45, 8 years’ service, earning £600/week

• 8 years × 1.5 (over 41) = 12 weeks
• 12 × £600 = £7,200 SRP

Use the GOV.UK Redundancy Pay Calculator for your exact figure.

Enhanced Redundancy Pay

Many employers offer enhanced redundancy pay above the statutory minimum, particularly in larger organisations. Check your employment contract or staff handbook. Enhanced pay may:

• Not cap the weekly pay figure
• Include more weeks per year of service
• Add additional payments for length of service

If no enhancement is mentioned, the statutory minimum is the floor.

Notice Pay

When you’re made redundant, you’re entitled to a statutory minimum notice period (1 week per year of service, capped at 12 weeks). Your contract may give more.

Payment in Lieu of Notice (PILON): If your employer asks you to leave immediately rather than work your notice, they must pay PILON — your full salary and contractual benefits for the notice period. PILON is fully taxable as earnings, regardless of any specific PILON clause in your contract (HMRC changed the rules in 2018).

Accrued Holiday Pay

Any untaken annual leave accrued up to your leaving date must be paid out. This is fully taxable.

Contractual Benefits

Check whether you’re owed any outstanding:

• Pro-rated bonus (check your contract — not all bonuses are payable on redundancy)
• Share awards or options that vest on redundancy (check scheme rules)
• Company car PILON or settlement if returning a car midway through an agreement

Step 2: Tax on Your Redundancy Package

The tax treatment of redundancy pay is important and often misunderstood:

Important: The £30,000 exemption covers only the genuine redundancy payment. It doesn’t cover notice pay, holiday pay, or bonuses — those are always taxable.

Pension Contributions from Redundancy Pay

If you receive a tax-free redundancy lump sum, you can contribute it to a pension and receive tax relief on it, subject to your annual allowance. This can be a very effective use of a redundancy payment — particularly for higher-rate taxpayers.

Consult a financial adviser before making large pension contributions from redundancy pay, especially if it would take your total contributions above £60,000 in the tax year.

Step 3: Claim Benefits Immediately

Universal Credit

You can claim Universal Credit from the day after your employment ends. Delay costs you money — there’s a 5-week initial wait for the first payment, so the sooner you claim, the sooner it arrives.

If your savings and redundancy payment together exceed £16,000, you won’t qualify for UC immediately. Capital between £6,000 and £16,000 reduces your UC payment.

Note: If your employer is paying you in lieu of notice (PILON), HMRC treats this as earned income for UC purposes during the period it covers. This can delay your UC start date.

Jobseeker’s Allowance (Contribution-Based JSA) / New Style JSA

If you’ve paid Class 1 NI contributions for at least 2 of the last 3 tax years, you may qualify for New Style JSA even if your savings disqualify you from UC. New Style JSA is £84.80/week (2026/27), paid for up to 6 months.

Other Benefits to Check

Run a free benefits check via Turn2us (turn2us.org.uk) to ensure you’re claiming everything you’re entitled to.

Step 4: Manage Your Money During the Gap

Create an Immediate Budget

Before spending anything, list your essential monthly outgoings:

Compare this against your monthly income (redundancy pay spread out, benefits, any other income). This tells you how long your redundancy payment will realistically last.

The Mortgage: Contact Your Lender

If you have a mortgage, contact your lender immediately. Most lenders have mortgage payment holiday or reduced payment arrangements for customers who have lost their jobs. Under the Financial Conduct Authority’s mortgage arrears guidance, lenders must consider your circumstances before taking any enforcement action.

Acting early is far better than missing a payment and defaulting into arrears.

The Landlord: Understand Your Rights

If you rent, you have contractual obligations for rent. However:

• Universal Credit housing element covers rent (subject to Local Housing Allowance limits)
• In financial hardship, contact your landlord or letting agent promptly — many will negotiate short-term arrangements rather than evict

Prioritise Debts in the Right Order

Not all debts are equal. Pay priority debts first:

1. Mortgage/rent
2. Council tax
3. Energy (gas/electric)
4. TV licence (if applicable — though fines are small)
5. Court fines

Only after these: credit cards, loans, overdrafts. Never miss a mortgage or rent payment to pay a credit card.

Step 5: If Your Employer Is Insolvent

If your employer can’t pay because they’re insolvent (administration, liquidation), the government steps in via the Redundancy Payments Service (RPS):

• You can claim statutory redundancy pay, notice pay, unpaid wages, and unpaid holiday pay
• Apply at GOV.UK/claim-redundancy
• Payments are made from the National Insurance Fund and are subject to the same caps as SRP
• The process typically takes 6–8 weeks

You may receive less than you’d have received from a solvent employer (particularly if owed enhanced redundancy pay above the statutory cap), but the statutory amounts are guaranteed.

Step 6: Consider Your Tax Position for the Year

Redundancy often means significantly reduced income for the remainder of the tax year. This can mean:

• You’ve overpaid income tax during the period you were employed
• A tax rebate is possible

HMRC will typically reconcile this at the end of the tax year and send a P800, but you can contact them directly if you believe you’ve overpaid. If you complete a Self Assessment return, include all income and deductions and any overpayment will be refunded.

Checklist Summary

Related Guides

• Redundancy Rights and What You’re Owed — legal rights in detail
• Universal Credit Guide — claiming and managing UC
• Budget Planner Guide — emergency budgeting during a job gap
• Career Change Financial Planning — managing a longer period of change