Produced by Tolley
  • 15 Dec 2021 17:51

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Statutory redundancy pay
  • Employment law obligations
  • What if the employer is insolvent?
  • Limited exemption for statutory redundancy payments
  • Reporting
  • Total amount received £30,000 or less
  • Total amount received more than £30,000

Statutory redundancy pay

Redundancy payments fall into two categories: statutory payments and non-statutory payments.

Statutory redundancy is the amount which must be paid by the employer to the employee under employment law and is a fixed amount for each year of service. Statutory redundancy pay is usually exempt from tax (see below).

Non-statutory redundancy payments are any other payment made by the employer to the employee on redundancy. The tax treatment of these payments is discussed in the How could a termination payment be taxed? guidance note.

Employment law obligations

An employee is entitled to a statutory redundancy payment if they are made redundant after being continuously employed by the employer for at least two years.

The statutory redundancy payment is calculated by reference to the employee’s age, length of service and gross weekly pay. The amount of a week’s pay is subject to a statutory maximum cap which is reviewed each year. For payments made between 6 April 2021 and 5 April 2022, the maximum amount of a week’s pay is £544. Length of service is capped at 20 years. You can calculate the amount the employee must receive using the redundancy pay calculator on the GOV.UK website.

The employer must provide the

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