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Newspage RawSource: Harvey Dhillon, Zmartly

Proposed redundancies jump, but the tax-free £30,000 dates from 1988

ended 07. October 2026

Employers in Great Britain notified 50,904 proposed redundancies in September 2026, the most in a month since October 2020, while the tax-free limit on redundancy pay has not changed since April 1988.

September's total is up from 19,557 in August, Insolvency Service management information published on 5 October shows. HR1 forms rose only from 282 to 353, the figures may be revised and not every proposal ends in dismissal.

For those let go, only the first £30,000 of statutory and enhanced redundancy pay combined is usually tax-free. Pay in lieu of notice and holiday pay are taxed as pay. No change to the limit has been announced for the 28 October 2026 Budget. That is a 1988 limit on 2026 payouts.

Questions we asked experts:

  1. Is a £30,000 limit set in 1988 now too low, or still the right line?
  2. Is it fair that a long-serving employee whose enhanced package goes over £30,000 pays tax on the rest, while a newer colleague whose redundancy pay is under the limit usually pays none on it?
  3. Are you advising an employer through a collective consultation, an employee weighing cash or a pension, or a borrower with an at-risk letter mid-application? If so, please give as much colour and detail as possible.

5 responses from the Newspage community

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Stephen PerkinsVerified
Norwich Mortgage Broker and Managing Director at Yellow Brick Mortgages
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An at-risk redundancy letter can create a real problem during a mortgage application because lenders are assessing whether the income used to support the loan is likely to continue. The worst thing a borrower can do is stay silent and hope to complete before anything changes. Tell your broker and lender as soon as circumstances change so the case can be reassessed properly. That may mean a lower loan, a different lender or waiting until employment is clearer, but discovering the issue at the last minute risks a collapsed purchase and much bigger costs.
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Kate UnderwoodVerified
Founder & Chief People Strategist at Kate Underwood HR & Training
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Is £30,000 still the right line? Only if your rent is still at 1988 prices. It hasn't moved in 38 years. The limit is old enough to have been made redundant itself.
Is it fair? Give a firm 25 years and you get a tax bill as a thank you. Join last year and you walk away clean. Link it to salary and the fat cats get the biggest break. Link it to years served, then index it so nobody forgets it for another four decades. Now the numbers. Proposed redundancies leapt from 19,557 to 50,904, but HR1 forms only crept from 282 to 353. That's a few big players swinging the axe. Small firms cutting under 20 jobs don't file an HR1, so they don't even make the count. Meanwhile tribunal claims passed 50,000 last year, up 39%. For a small firm, defending one can cost more than the redundancy. So employers pay up and move on. A settlement agreement is quicker, cheaper, and nobody wastes a week in a tribunal waiting room. It's cheaper to pay than to prove you were right.
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Tony RedondoVerified
Founder at Cosmos Currency Exchange
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As Clarkson asked yesterday: "Why would you start a business in the UK today?" The £30,000 tax-free redundancy limit was set 38 years ago. Adjusted for inflation, it would top £85,000 now. Enhanced packages routinely breach £30,000, turning relief into a tax bill. A frozen cap amid rising job losses is fiscal drag by stealth. The Treasury gains, redundant workers’ pay. It's manifestly unfair. A long-serving employee is taxed on everything above £30,000, often pushed into higher bands, while a shorter-tenured colleague pays nothing. Penalising long service erodes vital transitional capital. Employers in collective consultation can soften the blow with pension sacrifice on the excess, shielding it from income tax and employer NICs; employees should consider it, provided liquidity needs are met.
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Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
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A redundancy payment is not a windfall. It is financial runway while somebody rebuilds their income.

That is why a £30,000 tax-free limit unchanged since 1988 deserves serious scrutiny. A long-serving employee receiving a larger package can exceed it relatively easily, even though the money may need to replace months of salary.

I would not frame that as newer workers being treated “better”. The real problem is that the threshold has stood still while wages and living costs have moved enormously.

For anyone receiving a sizeable package, the first instinct should not be to spend it. Work out how long it needs to support you, what is taxable and whether pension planning is appropriate.

And if redundancy risk appears during a mortgage application, tell the adviser immediately.

Losing a job is difficult enough. The tax system should not make the safety net feel 38 years out of date.
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Ross LaceyVerified
Director at Fairview Financial Management
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The limit set in 1988 has been eroded by inflation, and it creates a cliff-edge for long-serving employees whose packages go over £30,000. We specialise in working with people going through redundancy, and there are often merits in having some or all of the excess paid into a pension rather than taken as cash. This can help manage the immediate tax bill and improve retirement provision. As ever, a well-thought-out plan for what happens next is essential, so take advice before you sign a settlement agreement.