Redundancy Pay in Scotland 2026/27: How Much You Get and What's Taxed

Quick Summary

• Statutory redundancy pay is age-banded — half a week's pay per year worked under 22, one week from 22 to 40, one and a half weeks from 41, with service capped at 20 years and weekly pay capped at £751
• The maximum statutory payment is £22,530 — which is below the £30,000 tax-free threshold, so statutory redundancy pay on its own is always tax-free
• The Scottish difference is the tax on anything above £30,000 — the threshold is UK-wide, but the income tax charged on the excess is devolved, so a Scottish taxpayer with a large enhanced package pays more than an identical worker in England
• See your own numbers — the Redundancy Pay Calculator works out your entitlement and the Scottish tax on any excess

Redundancy is the one money topic where people reliably guess the wrong number in both directions: they overestimate the statutory entitlement, and they underestimate the tax on anything above it.

Quick Answer: Statutory redundancy pay depends on your age and length of service — half a week's pay for each year worked under 22, one week for each year from 22 to 40, and one and a half weeks from 41 onwards. Service is capped at 20 years and weekly pay at £751, giving a maximum of £22,530. That is always tax-free. Anything your employer pays on top is tax-free only up to a combined £30,000; above that, a Scottish taxpayer pays Scottish income tax on the excess.

How statutory redundancy pay is calculated

Statutory redundancy pay comes from the Employment Rights Act 1996 and is identical across the UK. You need at least two years' continuous service with the same employer to qualify at all. After that, three things drive the number: your age, your length of service, and your weekly pay.

Age during each year worked	Entitlement per year
Under 22	Half a week's pay
22 to 40	One week's pay
41 and over	One and a half weeks' pay

The detail almost everyone gets wrong is in that first column: the rate applies to the age you were during each year of service, not your age when the job ends. A 45-year-old with 22 years behind them has not earned 1.5 weeks for every one of those years — only the four years worked from 41 onwards attract the higher rate.

Get that wrong and you overestimate badly. A 45-year-old on £32,000 with 22 years' service is entitled to 22 weeks' pay — £13,538. Band the whole 20 countable years at the over-41 rate instead and you would tell them 30 weeks, roughly £5,000 too much.

The three caps

Cap	2026/27
Years of service counted	20 (the most recent)
Weekly pay	£751
Overall payment	£22,530

Those caps apply to redundancies on or after 6 April 2026, and they are uprated every April. Two consequences worth internalising:

1. The weekly cap bites early. £751 a week is about £39,000 a year. Above roughly that salary, extra earnings add nothing to your statutory redundancy pay — a £45,000 earner and a £95,000 earner with identical service receive exactly the same amount.
2. The caps reconcile. 20 years × 1.5 weeks × £751 is exactly £22,530, so the overall maximum is simply the best case of the other two caps rather than a separate ceiling.

Worked example: 18 years in Aberdeen

Take someone made redundant at 52 after 18 years, earning £45,000. Their actual weekly pay is £865, but the statutory calculation uses the capped £751.

Portion of service	Rate	Weeks
11 years worked aged 41+	1.5 weeks each	16.5
7 years worked aged 22–40	1 week each	7
Total entitlement		23.5 weeks

That comes to £17,649 — all of it tax-free, because it is comfortably under £30,000. Note how much of the value sits in those post-41 years: they are 61% of the service but 70% of the payment.

Is redundancy pay taxable?

The first £30,000 of a redundancy payment is tax-free, and no National Insurance is due on it. That threshold is UK-wide and reserved to Westminster — it is the same in Glasgow as in Guildford, and it has not moved in decades.

Because the statutory maximum is £22,530, statutory redundancy pay is always tax-free. The question only becomes live when your employer pays more than the legal minimum, which many do.

Above £30,000:

• Income tax is charged on the excess, at your own jurisdiction's rates
• Employee National Insurance is not — you pay no NI on the excess. Your employer pays employer Class 1A National Insurance on it
• The excess sits on top of everything else you have earned in the same tax year, so it is taxed at your marginal rate

What the £30,000 does not cover

This catches people out, because it makes the taxable figure larger than expected. The exemption applies to genuine compensation for losing your job. It does not cover:

• Unpaid wages — taxed and NI'd as normal earnings
• Holiday pay — likewise, taxed and NI'd in full
• Pay in lieu of notice (PILON) — post-employment notice pay is treated as earnings, taxed and NI'd, and does not use up any of your £30,000

So a £45,000 "package" that is really £25,000 redundancy plus £12,000 PILON plus £8,000 holiday pay has only £25,000 sitting under the exemption. The other £20,000 is ordinary taxable pay. Read the breakdown in your settlement agreement, not the headline.

Where Scotland actually differs

Here is the part no UK-wide redundancy calculator will tell you. The £30,000 threshold is reserved, but income tax is devolved — so the rate applied to the excess depends on which side of the border you pay tax.

Take a £60,000 package for someone who has already earned £40,000 this tax year. The taxable excess is £30,000 either way, but the tax on it is not:

	Scotland	Rest of UK
Tax-free element	£30,000	£30,000
Taxable excess	£30,000	£30,000
Income tax on the excess	£11,831	£9,946
Difference	£1,885 more in Scotland	—

That gap is not a rounding error — it is real money on a payment you only receive once. On a larger package the divergence grows: £100,000 with £60,000 of other income costs a Scottish taxpayer £3,330 more than the identical package in England, because the excess runs through Scotland's higher, advanced and top rates.

The direction reverses at low incomes

Worth saying plainly, because the "Scotland always pays more" shorthand is wrong at the bottom. Scotland's starter and basic rates sit below the rest of the UK for lower earners. If you are made redundant early in the tax year with little other income, the Scottish bill on the same £60,000 package is actually £35 lower than it would be in England.

Which points at the single most useful piece of planning here.

Timing matters more than most people realise

The taxable excess stacks on top of your other income for that tax year. The same package therefore costs very different amounts depending on when it lands:

• A payment received in April, before you have earned much, is taxed largely at the lower bands
• The same payment in March, on top of a full year's salary, is taxed at your top marginal rate

If your leaving date is negotiable — and in a voluntary redundancy or settlement it often is — moving it across 6 April can be worth thousands. And if the excess pushes your total income past £100,000, you also lose Personal Allowance at £1 for every £2 above it, producing an effective rate far above the headline. Our personal allowance trap explainer covers that band.

NHS Scotland: a different scheme entirely

If you work for NHS Scotland on Agenda for Change terms, statutory redundancy pay is largely irrelevant to you — Section 16 of the Scottish AfC handbook is far more generous:

• One month's pay for each complete year of reckonable service
• After a minimum of two years' (104 weeks') continuous service
• Up to a maximum of 24 years counted
• A "month's pay" is whichever is more beneficial: 4.35 × a week's pay, or one twelfth of your annual salary at termination

Compare the two for the same person — 18 years' service, £45,000, aged 52. Statutory would pay £17,649. Section 16 pays £67,500 — nearly four times as much, and well above the £30,000 threshold, so a chunk of it is taxable at Scottish rates.

Two warnings, and the second is the important one.

First, the "more beneficial" test in paragraph 16.7 is worth checking if you work regular overtime or unsocial hours. A week's pay including those enhancements, multiplied by 4.35, can beat one twelfth of basic salary.

Second — and this is where almost every online NHS redundancy calculator goes wrong — the Scottish scheme is not the English one. The handbook's Section 16 opens with its own warning that the Scottish version "differs from the version applicable in other parts of the UK". Third-party NHS redundancy calculators routinely apply a £23,000 salary floor, an £80,000 salary ceiling and a £160,000 overall cap. Those are the English terms. No such figure appears anywhere in the Scottish Section 16 — there is no salary cap and no overall cap in the Scottish scheme at all. For a long-serving senior clinician, using an English calculator can understate the entitlement by a very large margin.

If your employer quotes a figure that looks capped, ask which version of Section 16 they applied.

What to do when redundancy is on the table

• Check your contract first. Statutory redundancy pay is a legal floor, not a norm. Enhanced schemes are common in the public sector, universities and larger employers.
• Get the breakdown in writing. Ask specifically how much is redundancy pay, how much is PILON, and how much is holiday pay — only the first uses the £30,000 exemption.
• Ask about the leaving date. Moving it across a tax-year boundary can materially change the tax bill.
• Claim within six months. You have 6 months from the date your job ends to claim statutory redundancy pay.
• Check your benefit entitlement early. A redundancy payment counts as capital for means-tested benefits — over £16,000 in savings usually rules out Universal Credit, so a large payment can leave you ineligible for a while. Our Universal Credit in Scotland guide covers the capital rules.
• If your employer is insolvent, statutory redundancy pay can be claimed from the Redundancy Payments Service instead.

Frequently Asked Questions

Is statutory redundancy pay taxable in Scotland?

No. The statutory maximum is £22,530, which is below the £30,000 tax-free threshold, so statutory redundancy pay is always received in full with no income tax and no National Insurance. Tax only becomes an issue if your employer pays an enhanced or ex-gratia amount that takes the combined package above £30,000.

How much redundancy pay will I get after 10 years?

It depends on your age during those years and your weekly pay, not just the length of service. Ten years worked entirely between 22 and 40 gives 10 weeks' pay; ten years worked from 41 onwards gives 15 weeks. Someone aged 38 on £28,000 with 10 years' service gets £5,385, because all ten years fall in the one-week band and their weekly pay is below the £751 cap.

Do I pay National Insurance on redundancy pay?

No employee National Insurance is due on a genuine redundancy payment, including the part above £30,000 — that part attracts income tax only. Your employer pays employer Class 1A National Insurance on the excess. Unpaid wages, holiday pay and pay in lieu of notice are different: those are taxed and NI'd as ordinary earnings.

Does a Scottish taxpayer pay more tax on redundancy than someone in England?

On a large package, yes. The £30,000 tax-free threshold is UK-wide, but the income tax on anything above it follows Scottish rates. On a £60,000 package with £40,000 of other income in the same year, a Scottish taxpayer pays £1,885 more than someone in England. At low total incomes the position reverses, because Scotland's starter and basic rates are lower.

How is NHS Scotland redundancy pay calculated?

Under Section 16 of the Scottish Agenda for Change handbook: one month's pay for each complete year of reckonable service, after at least two years, capped at 24 years of service. A month's pay is the more beneficial of 4.35 times a week's pay or one twelfth of your annual salary. Unlike the English version, the Scottish scheme applies no salary floor, no salary ceiling and no overall cap.

Can I claim Universal Credit after redundancy?

Possibly, but a redundancy payment counts as capital. Savings above £16,000 normally rule out Universal Credit entirely, and anything above £6,000 reduces the award. A large payment can therefore mean waiting until your savings fall before you qualify. New Style Jobseeker's Allowance is based on your National Insurance record rather than savings, so it may be available when Universal Credit is not.

Related Articles

• Scottish Income Tax Rates — the six bands that determine the tax on any excess above £30,000
• Take-Home Pay in Scotland at Every Salary — what your replacement salary is actually worth
• Universal Credit in Scotland — the capital rules that a redundancy payment runs into
• Scottish Benefits Guide — what else you may be entitled to between jobs
• Salary Sacrifice in Scotland — paying part of a redundancy package into a pension
• Scottish Debt Solutions Guide — if redundancy has left debts unmanageable

Disclaimer

This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax rates and thresholds can change — always verify current rates with Revenue Scotland, HMRC, or mygov.scot, and speak to a qualified financial adviser for advice specific to your circumstances.

Sources

• Redundancy: your rights — Redundancy pay — GOV.UK
• Calculate your statutory redundancy pay — GOV.UK
• Redundancy: your rights — Tax and National Insurance — GOV.UK
• Termination payments: what you pay tax and National Insurance on — GOV.UK
• NHS Scotland Agenda for Change Terms and Conditions Handbook, Section 16 — MSG