Check what you're owed first

Before anything else, establish exactly what your employer owes you. This includes any outstanding salary, accrued but unused holiday pay, notice pay (or working your notice), and redundancy pay if you qualify. Statutory redundancy pay applies after two years' continuous service and is calculated using age, length of service and weekly pay, subject to a government-set cap; many employers also pay enhanced contractual redundancy on top. The first £30,000 of most redundancy payments is usually free of Income Tax and National Insurance, though notice pay and holiday pay are typically taxed as normal earnings — it's worth asking for a clear breakdown from your employer or HR so you understand what's taxable and what isn't.

Claim benefits you're entitled to

If your income has stopped or reduced, check your eligibility for Universal Credit, which is means-tested and takes into account savings and any redundancy payment received. New Style Jobseeker's Allowance is based on your National Insurance record rather than savings, so it may be available even if you have savings that would rule out Universal Credit, and the two can sometimes be claimed alongside each other. Apply as soon as possible after your job ends, since payments aren't usually backdated significantly and there's often a wait before the first payment arrives.

Reset your budget around reduced income

With income uncertain, it helps to go through your spending line by line and separate essentials (rent or mortgage, utilities, food, insurance, minimum debt repayments) from discretionary spending. Pausing or cancelling subscriptions, streaming services, gym memberships and similar non-essential direct debits can free up meaningful cash quickly. If you have loans or a mortgage, contact the lender early if you think you might struggle — many offer payment holidays or reduced payment arrangements, and acting before you miss a payment generally leads to better outcomes and less impact on your credit file.

Use — but don't panic about — an emergency fund

If you have savings set aside for exactly this situation, now is the time to draw on them, ideally in a planned way that stretches them over your expected job search period rather than spending at the same rate as before. If you don't have a fund, prioritise essential bills first and use any available benefits and redundancy pay to bridge the gap, rather than turning immediately to high-cost credit, which can create longer-term problems.

Don't touch your pension the wrong way

If you were in a workplace pension, it doesn't disappear when you leave the job — it stays invested and you can typically leave it where it is, transfer it, or (once you reach the normal minimum pension age) start drawing from it. Be very wary of cashing in a pension early to cover a short-term cash gap: doing so can trigger a large tax bill, since only the first 25% is normally tax-free with the rest taxed as income, and it also removes money from long-term growth at exactly the point compounding matters most. Speak to Pension Wise (the free government guidance service) before making any decision about accessing a pension.

Getting back into work

Jobcentre Plus can provide support with job searching and, where relevant, help you access Universal Credit or New Style JSA claims. The National Careers Service offers free advice on retraining, skills gaps and career changes, which can be particularly useful if redundancy prompts a change of direction. It's also worth checking whether your redundancy package included outplacement support or a training budget, as some employers fund this as part of a settlement.

Key takeaways

  • Confirm exactly what pay and redundancy money you're owed, and check the tax-free £30,000 threshold on redundancy payments
  • Apply promptly for Universal Credit and/or New Style Jobseeker's Allowance if eligible
  • Cut non-essential spending early and contact lenders proactively if you expect to struggle with payments
  • Use any emergency fund in a planned way rather than at your previous spending rate
  • Leave your pension invested rather than cashing it in early, and get free guidance from Pension Wise first