Employers across Great Britain announced 50,904 proposed redundancies in September 2026, the highest monthly figure since October 2020, while the tax-free threshold on redundancy payments has remained frozen since April 1988. September's figure marks a significant rise from the 19,557 recorded in August, according to Insolvency Service management information published on October 5.
HR1 forms – the compulsory advance notification documents that UK employers must file with the Government via the Redundancy Payments Service on GOV.UK when proposing collective redundancies – increased modestly from 282 to 353, though the statistics may yet be revised and not every proposal culminates in actual dismissal. For those made redundant, typically only the initial £30,000 of combined statutory and enhanced redundancy payments remains tax-free. Both pay in lieu of notice and holiday pay are subject to taxation as standard earnings.
Chancellor's Budget approaches
While Chancellor John Healey is set to deliver his first Budget on October 28, experts said there was no suggestion the allowance would change.
Kate Underwood, founder and chief people strategist at Southampton-based Kate Underwood HR and Training, said: "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."
Inflation-adjusted limit would be £85,000
Tony Redondo, founder of Newquay-based Cosmos Currency Exchange, said: "As Clarkson asked (last week): '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."
Nouran Moustafa, practice principal and Independent Financial Adviser at Roxton Wealth, said: "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."
Pension planning and mortgage advice
Ross Lacey, director of Rayleigh-based Fairview Financial Management, said: "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."
Stephen Perkins, Norwich mortgage broker and managing director of Norwich-based Yellow Brick Mortgages, said: "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."
