Being made redundant is unsettling, but you have rights, and there is support to help you through it. As well as redundancy pay from your employer, you may be able to claim benefits straight away. This guide explains redundancy pay, how it affects your benefits, and what you can claim when you lose your job, so you can make the most of the help available.
Statutory redundancy pay
If you have worked for your employer for at least two years, you are usually entitled to statutory redundancy pay. It is based on your age, your length of service up to a maximum of 20 years, and your weekly pay, which is capped for this purpose. For 2026/27 the weekly pay used in the calculation is capped at £751, which means there is a maximum total amount of statutory redundancy pay, currently around £22,530. Many employers pay more than the statutory minimum under their own schemes.
How redundancy pay is taxed
Redundancy pay is treated quite generously for tax. Genuine redundancy payments are tax-free up to £30,000, so most statutory redundancy pay is not taxed at all. Amounts above £30,000 may be taxed, and other payments bundled in with your redundancy, such as pay in lieu of notice or holiday pay, are treated as normal earnings and taxed in the usual way. It is worth checking how your total package breaks down so you know what is tax-free and what is not.
Redundancy pay and Universal Credit
How redundancy pay affects Universal Credit depends on what kind of payment it is. The redundancy lump sum itself is usually treated as capital, not income, which matters because of the savings rules. If your total capital stays under £6,000 it does not affect your Universal Credit, between £6,000 and £16,000 it reduces it, and over £16,000 it stops your claim until your capital falls. Pay in lieu of notice, by contrast, is usually treated as earnings in the month you receive it.
New Style Jobseeker's Allowance
One benefit worth knowing about after redundancy is New Style Jobseeker's Allowance, which is based on your National Insurance record rather than your savings. Because it is not means-tested on capital, you can usually claim it even if your redundancy lump sum would rule out means-tested help, as long as you have paid enough National Insurance and are available for and looking for work. It is paid for up to six months and can be claimed alongside Universal Credit.
Report the change
If you already claim Universal Credit or other benefits, you must report your redundancy and any payments you receive as a change of circumstances, so your claim is worked out correctly. Reporting promptly avoids building up an overpayment that you would later have to repay. If you are not already claiming, losing your job may mean you now qualify for help you did not before, so it is worth checking what you can claim straight away.
Your notice and other rights
As well as redundancy pay, you have other rights when you are made redundant. You are entitled to a notice period, or pay in lieu of it, based on your length of service, and to be paid for any holiday you have not taken. You also have the right to a proper consultation and to be considered fairly. If you think your redundancy was not genuine or was handled unfairly, it is worth getting advice, as you may have a claim.
Other benefits you may qualify for
Beyond Jobseeker's Allowance, losing your job through redundancy can open up other help. If your income has dropped, you may now qualify for Universal Credit, a reduction in your council tax, and help with health costs. It is worth doing a full benefits check once you know your new circumstances, because you may be entitled to support you could not claim while you were working, and claiming it promptly helps your finances recover.
Make the most of your redundancy pay
Because the redundancy lump sum is treated as savings for means-tested benefits, how you use it can matter. Spending it sensibly on genuine needs, such as clearing priority debts or essential costs, is reasonable, but deliberately spending it just to qualify for benefits can be treated as still having that money. The safest approach is to use the money for genuine needs and to get advice if you are unsure how spending it might affect a claim.
Get advice on your situation
Redundancy brings together employment rights, tax and benefits all at once, which can be a lot to take in. Getting advice helps you understand your full redundancy package, check it is correct, and work out the best order in which to claim benefits around it. An adviser can also tell you whether New Style Jobseeker's Allowance, Universal Credit, or both, will work best for you, so you do not miss out on support you are entitled to.
Notice pay and your final wages
When you leave, your final pay packet may include several things alongside redundancy pay, such as your normal wages up to your leaving date, pay for any holiday you have built up but not taken, and pay in lieu of notice if you are not working your notice. These are treated as earnings, so they are taxed and can affect a means-tested benefit in the period you receive them, unlike the redundancy lump sum itself, which is treated as savings.
Check your payments are right
It is worth checking that your redundancy and final payments have been worked out correctly, as mistakes do happen. Make sure your length of service, your age bands and your weekly pay have been used properly in the redundancy calculation, and that you have been paid for all your untaken holiday and your full notice entitlement. If something does not look right, raise it with your employer, and get advice if you cannot resolve it.
In short
If you are made redundant with at least two years' service, you are usually entitled to statutory redundancy pay, tax-free up to £30,000. The lump sum is treated as capital for Universal Credit, while pay in lieu of notice counts as earnings. You may also be able to claim New Style Jobseeker's Allowance based on your National Insurance record. Report any change and check what you can claim.
Plan for what comes next
Redundancy is often a difficult moment, but with the right information it can be managed. Understanding your redundancy pay, how it interacts with benefits, and what you can claim straight away puts you in control and helps your finances through the transition. Take the practical steps promptly, get advice where it helps, and use the time and any redundancy money sensibly as you look for your next role.
You are not on your own
If redundancy has left you worried about money, remember there is help beyond your employer, from benefits to free advice to support back into work. Claiming what you are entitled to quickly, and getting good advice on the best combination for your situation, can ease the immediate pressure considerably. Many people come through redundancy and into a new role, and the support available is there precisely to help you do exactly that.
Where to get help
Citizens Advice can help you understand your redundancy rights and benefits. See our guides to New Style Jobseeker's Allowance and benefits when you lose your job.