NHS Exit Pay Cap 2026/27

Last updated: 11 November 2026 · Figures verified against the Agenda for Change Handbook Section 16, SI 2020/1122 and SI 2021/197, and HM Treasury special severance guidance (November 2025).

By the NHS Bands Pay editorial team

What the £95,000 cap was

The cap was not an NHS rule. It was a public-sector-wide rule, made by the Restriction of Public Sector Exit Payments Regulations 2020, SI 2020/1122, which were made on 14 October 2020 and came into force on 4 November 2020. Regulation 3 said a relevant authority must not make an exit payment above £95,000 for a relevant public sector exit, and the £95,000 figure was the amount specified in section 153A(1) of the Small Business, Enterprise and Employment Act 2015.

The cap applied to the total exit payment for one exit. Where two or more relevant exits for the same person happened within 28 consecutive days, the total across them was capped at £95,000, so splitting an exit into two payments did not get round it. For NHS staff, the cap mattered most at the top. A long-serving senior manager leaving with a large contractual redundancy payment could hit £95,000 easily, while most staff were nowhere near it. That is the first thing to understand about the cap: it was a ceiling on the total package, not a limit on any single element, and it bit hardest on the largest exits.

It is also worth saying plainly what the cap was not. It was not a cap on NHS redundancy pay as such, and it was not a rule the NHS invented. It was a Treasury-led, government-wide control on public sector exit payments, and it applied to local government, the civil service, the police and the NHS alike. When it was revoked, it was revoked for the whole public sector at once.

The cap's short life: a timeline

The cap lasted just over four months, from the start of November 2020 to the middle of March 2021. The dates matter, because the top-up rule that follows turns on them.

The revocation was not a quiet expiry. Regulation 3 of the 2021 Regulations revoked the 2020 Regulations outright, save only as needed for the top-up rules that follow. From 19 March 2021 the cap no longer applied in law, and no new cap has replaced it. Any guide, payslip note or HR letter that still describes a £95,000 NHS exit payment cap as live is out of date by more than five years.

Caught by the cap? The top-up rule

The revocation did not leave people who had already been capped to carry the loss. Regulation 4 of SI 2021/197 covers the relevant period, 4 November 2020 to 19 March 2021. Where a person would have been entitled to a greater amount had the cap not applied, the relevant authority must pay the difference, plus interest calculated under the Judgment Debts (Rate of Interest) Order 1993. The Explanatory Note puts it plainly: the recipient is treated as if the cap had never applied.

If you left an NHS organisation in that window and your exit payment was held to £95,000, check your old paperwork and ask the former employer's payroll or HR team about the top-up. The duty to pay the difference sits with the authority that made the capped payment, and the interest runs from the original payment. Keep the original settlement letter, the payslips for the exit payment, and any letter that mentions the cap, because those are the documents that show what was cut. If the employer says no top-up is due, ask for the reason in writing, and take the letter to your union, because the rule is in the regulations themselves, not in local policy.

One point of care: the top-up covers only payments that were actually reduced by the cap. If your exit payment was under £95,000 anyway, the cap did not cut anything, and there is nothing to top up. The question to ask is whether the figure you were paid was the figure the cap allowed, or the figure your contractual entitlement would have given.

What applies now: Section 16 redundancy pay

With the cap gone, the limit on an NHS exit payment is the contractual redundancy scheme in Section 16 of the Agenda for Change terms and conditions, which applies to Agenda for Change staff in England. Scotland, Wales and Northern Ireland have equivalent provisions under their own arrangements, so check the position for your own nation before relying on the England figures. Our Scotland pay guide, Wales pay guide and Northern Ireland pay guide set out how each nation differs.

Section 16 sets three conditions. First, you need at least 2 years' continuous full-time or part-time service to qualify at all. Second, the payment is one month's pay for each complete year of reckonable service. Third, a minimum of 2 years and a maximum of 24 years of reckonable service are counted, and fractions of a year are not taken into account. So 10 years and 11 months of reckonable service pays for 10 years, not 11.

A month's pay is whichever is more beneficial to the member of staff: 4.35 times a week's pay, calculated under sections 221 to 224 of the Employment Rights Act 1996, or one twelfth of the annual salary in payment at the date of termination. The worked examples on this page use one twelfth of annual salary, which is the figure payroll most often starts from. Where the 4.35 route gives a higher month's pay, payroll must use that instead, so a real settlement can be a few pounds higher than the figures here. If the figure you are offered is slightly above these examples, ask payroll which basis was used.

Then come the floor and the ceiling, which have applied since the 2015 change to Section 16. For staff earning under £23,000 a year full-time equivalent, the payment is calculated using notional full-time annual earnings of £23,000, pro-rated for part-time hours. For staff earning over £80,000 a year full-time equivalent, it is calculated using notional full-time annual earnings of £80,000, pro-rated for part-time hours. And no redundancy payment will exceed £160,000, pro-rata.

The floor is worth a sentence of its own. On the 2026/27 England scale the lowest full-time point is Band 2 at £25,272, which sits £2,272 above the £23,000 floor, so the floor changes nothing for full-time staff on the current scale. It still matters as a protection if the scale ever falls below it, and it matters for the way part-time pay is pro-rated, but no full-time Agenda for Change salary in 2026/27 is low enough for it to bite.

The ceiling is the one that bites. Any Agenda for Change salary above £80,000 a year is treated as £80,000 for the calculation, so the maximum payment is 24 months at £6,666.67 a month, which is £160,000. Band 8c top and Band 9 are both above the ceiling, so both cap out at £160,000 after 24 years. Our redundancy pay guide sets out the full Section 16 rules, including reckonable service, consultation rights and suitable alternative employment, and our redundancy pay calculator estimates your own payment from your band and service.

Worked examples: what Section 16 pays

The table below shows the maximum redundancy payment after 24 years of reckonable service at the top of each band, on the 2026/27 England scale. The chart plots the same figures, so the shape of the ceiling is visible at a glance: pay rises with the band until Band 8a, then flattens, because the £80,000 ceiling stops the two highest bands from going any further.

The Band 8c and Band 9 rows are capped by the £80,000 ceiling. Without the ceiling, 24 years at Band 8c top would pay £183,218, which is £23,218 above the maximum, and 24 years at Band 9 top would pay £259,566, which is £99,566 above it. The ceiling, not the band, decides what those two rows pay.

Most exits are not at the 24-year maximum, so the table below works four ordinary cases through, using one twelfth of annual salary as a month's pay.

Read the rows in turn. A Band 2 worker on £25,272 with 15 years of reckonable service gets one month's pay of £2,106 for each year, which is £31,590. A Band 5 worker at the top of the band on £39,043 with 10 years gets £32,535.83, which is 10 months of pay (10/12 of £39,043, at £3,253.58 a month to the penny). A Band 7 worker at the top on £56,515 with 20 years gets £94,191.67, which is 20 months of pay (20/12 of £56,515, at £4,709.58 a month to the penny).

The part-time row shows how pro-rating works. A Band 6 worker at the top of the band on a 0.6 whole-time-equivalent contract earns 0.6 of £48,117, which is £28,870.20 a year, so one month's pay is £2,405.85. With 12 years of reckonable service the payment is £28,870.20, which is exactly one year's actual pay, because 12 months of pay is one year. Part-time service is pro-rated on actual pay, and the ceiling and floor are applied to the full-time equivalent salary first, then pro-rated, which is why the part-time calculation starts from the full-time figure and works down.

Old cap against new rules

The comparison below shows who the cap actually hurt, by putting the same exit through both sets of rules.

A Band 6 worker at the top of the band with 24 years would have lost £1,234 to the cap: the Section 16 payment of £96,234 held to £95,000. A Band 9 worker at the top with 24 years would have lost £164,566: the uncapped payment of £259,566 cut first by the Section 16 ceiling to £160,000, then by the exit cap to £95,000. A Band 2 worker with 15 years was never near the cap at all, and would have been paid £31,590 either way. That is why the cap was fought hardest by senior staff and their unions, and why its revocation mattered most at the top of the scale.

The £99,999 cap that never happened

The story did not end with the revocation. NHS Employers, in its Agenda for Change pay deal 2023 non-pay commitments update, with an update line dated 10 April 2025, records that the redundancy cap workstream considered implementing a cap of just under £100,000 through Section 16. That would have cut the maximum redundancy payment agreed in 2015 from £160,000 to £99,999, a cut of £60,001. The group did not reach a consensus on any proposal to change the current redundancy cap arrangements, so nothing changed. The £160,000 maximum stands, and no new cap is in force. Anyone quoting a £99,999 NHS redundancy cap is describing a proposal that was considered and not agreed, not a rule.

That distinction is worth holding on to, because the two numbers still circulate. £95,000 was a real cap, in force for just over four months in 2020 and 2021, and then revoked. £99,999 was a proposal, considered in a workstream, and never agreed. Neither number limits an NHS exit payment today.

Special severance payments and Treasury approval

The other half of the current picture is special severance. HM Treasury's Guidance on Public Sector Exit Payments: Use of Special Severance Payments, November 2025 edition, supplements the special severance guidance in Managing Public Money, Annex 4.13. It defines special severance payments as payments made to employees, officeholders, workers, contractors and others outside of normal statutory or contractual requirements when leaving employment in public service, and as any payments on termination which do not correspond to an established contractual, statutory or other legal right.

What is not special severance matters as much as what is. Statutory redundancy payments, contractual redundancy payments whether voluntary or compulsory, payment for untaken annual leave, and payments ordered by a court or tribunal are not special severance payments. So a Section 16 redundancy payment needs no Treasury approval on its own. It is the extra payment on top, the settlement figure, the payment in lieu of notice, the extended benefit, that can turn a package into a special severance case. Payment in lieu of notice is taxed as normal pay, and it is not covered by the first £30,000 tax-free termination-payment exemption.

The control process in the November 2025 guidance runs as follows. Special severance payments should be exceptional. Departments must always consult the Treasury in advance when considering a special severance payment if it is novel, contentious or repercussive. Where such a payment totals £300,000 or more, approval from the Chief Secretary to the Treasury is also required, and where an exit package including a special severance payment is at or above £300,000 and is novel, contentious or repercussive, the Chief Secretary must approve it. Payments of £300,000 or more that are not novel, contentious or repercussive do not require Treasury approval. Departmental Accounting Officers have authority to approve special severance payments that are not novel, contentious or repercussive. Arm's Length Bodies, which the guidance says include NHS organisations, should seek approval from the Accounting Officer of their sponsor department for all special severance payments, regardless of value. And Treasury approval is still required if the payment is novel, contentious or repercussive, regardless of value, with a payment to a Special Adviser or to someone earning over the senior pay threshold given as an example. The guidance itself does not state a pound figure for that senior pay threshold, and this guide does not quote one.

The practical point for NHS staff is that there is no NHS-specific pound threshold in the November 2025 guidance. Whether a payment needs approval turns on what the payment is and whether it is novel, contentious or repercussive, not on a single NHS number. If any part of your exit package is described as a special severance payment, ask who approved it and under which rule, before you sign.

Who Section 16 does not cover

Section 16 is an Agenda for Change provision, and the Handbook states its terms apply to all staff directly employed by NHS organisations except very senior managers and staff within the remit of the Doctors and Dentists Review Body. Very senior managers are therefore outside Section 16: their exit terms sit in their individual contracts, and any payment beyond their contractual rights is judged under the special severance guidance. Our very senior managers pay guide sets out how VSM pay is set.

Doctors and dentists are also outside Agenda for Change, so their exit terms sit in their own contracts too. The £95,000 cap, while it lasted, applied across the public sector and so caught medical and dental exits as well, but the Section 16 formula never applied to them. For the medical pay scales that sit behind those contracts, see our doctor pay scales guide and the 2026/27 pay rise guide.

One more boundary is worth stating. A redundancy payment is not the whole exit package. Notice pay, untaken annual leave, pension strain costs where early retirement is chosen instead of the lump sum, and any special severance payment are separate elements, each with its own rules and its own tax treatment. Add them together without checking each one and the total will mislead you. Our guide to your pension if you leave the NHS sets out what happens to accrued pension benefits on redundancy, and our pay disputes guide sets out what to do if the figure you are offered does not match the rules.

How to check your own position

• Work out which kind of payment you are getting. Contractual redundancy under Section 16, statutory redundancy, a special severance payment, payment in lieu of notice, or a mix. Only the contractual redundancy part follows the Section 16 formula.
• Get your reckonable service date in writing. Ask ESR or HR for the date, and confirm how many complete years count. Fractions of a year are not counted.
• Confirm the salary figure being used. Check whether it includes London weighting, and ask whether the £23,000 floor or the £80,000 ceiling changes it.
• If you left between 4 November 2020 and 19 March 2021 and your payment was held to £95,000, ask about the top-up. Regulation 4 of SI 2021/197 requires the difference plus interest. Bring the original settlement letter and payslips.
• If any part of the package is a special severance payment, ask who approved it. Ask under which rule, and whether the sponsor department Accounting Officer or the Treasury was involved.
• Check the tax treatment of each element. The first £30,000 of a genuine termination payment is generally free of income tax, but payment in lieu of notice is taxed as normal pay. Our redundancy pay guide sets out the pension and tax consequences in full.
• Get union advice before signing anything. Redundancy disputes are fact-sensitive and tribunal time limits are short, so diary them at once and take advice early.

Frequently asked questions

Is there still a £95,000 cap on NHS exit payments?

No. The £95,000 cap was revoked by the Restriction of Public Sector Exit Payments (Revocation) Regulations 2021, SI 2021/197, which came into force on 19 March 2021. No replacement cap has been introduced, and the November 2025 HM Treasury special severance guidance sets no NHS-specific pound threshold.

What was the NHS exit payment cap?

The cap was a public-sector-wide rule, not an NHS-only rule. The Restriction of Public Sector Exit Payments Regulations 2020, SI 2020/1122, came into force on 4 November 2020 and said a relevant authority must not make an exit payment above £95,000 for a relevant public sector exit. Where two or more exits for the same person happened within 28 consecutive days, the total was capped at £95,000.

My exit payment was cut by the cap in 2020 or 2021. Can I get the money back?

The revocation regulations say yes. Regulation 4 of SI 2021/197 covers the period from 4 November 2020 to 19 March 2021: where you would have been entitled to a greater amount had the cap not applied, the authority must pay the difference, plus interest under the Judgment Debts (Rate of Interest) Order 1993. Contact the former employer's payroll or HR team with your original settlement letter and payslips.

What is the maximum NHS redundancy payment now?

£160,000, pro-rata for part-time staff. Under Agenda for Change Section 16, redundancy pay is one month's pay per complete year of reckonable service, up to 24 years, and the salary used is capped at £80,000 a year full-time equivalent. Twenty-four months at £80,000 a year is £160,000.

How is NHS redundancy pay calculated?

One month's pay for each complete year of reckonable service, with at least 2 years' continuous service to qualify and a maximum of 24 years counted. Fractions of a year are ignored. A month's pay is whichever is more beneficial: 4.35 times a week's pay, or one twelfth of the annual salary in payment at termination. The salary used has a £23,000 floor and an £80,000 ceiling on a full-time equivalent basis, pro-rated for part-time hours.

What is a special severance payment?

Any payment on termination that does not correspond to an established contractual, statutory or other legal right. Statutory and contractual redundancy payments, payment for untaken annual leave, and court or tribunal ordered payments are not special severance payments. Special severance payments should be exceptional, and HM Treasury's November 2025 guidance controls who can approve them.

Does the exit pay cap apply to very senior managers or doctors?

The £95,000 cap, while it lasted, applied across the public sector, so it caught senior exits too. But Section 16, which sets the £160,000 redundancy maximum now, is an Agenda for Change provision: it does not cover very senior managers or doctors and dentists, who sit outside Agenda for Change. Their exit terms are set by their individual contracts, and any payment beyond their contractual rights is judged under the special severance guidance.

Was the NHS redundancy maximum ever cut to £99,999?

No. A workstream under the Agenda for Change pay deal 2023 considered a cap of just under £100,000 through Section 16, which would have cut the maximum from £160,000 to £99,999, but the group did not reach a consensus on any proposal to change the current arrangements, and the update of 10 April 2025 records that nothing changed. The maximum remains £160,000.

Sources and independence

Source: legislation.gov.uk, The Restriction of Public Sector Exit Payments Regulations 2020, SI 2020/1122 (made 14 October 2020, in force 4 November 2020, cap £95,000).

Source: legislation.gov.uk, The Restriction of Public Sector Exit Payments (Revocation) Regulations 2021, SI 2021/197 (made 25 February 2021, in force 19 March 2021; Regulation 4 top-up plus interest).

Source: NHS Employers, NHS Terms and Conditions of Service Handbook, Section 16 (redundancy, England) (paragraphs 16.3, 16.7, 16.8 and 16.9: qualifying service, month's pay, £23,000 floor, £80,000 ceiling, £160,000 maximum).

Source: NHS Employers, Agenda for Change pay deal 2023, non-pay commitments update (10 April 2025 update) (redundancy cap workstream: £99,999 considered, no consensus, no change).

Source: HM Treasury, Guidance on Public Sector Exit Payments: Use of Special Severance Payments, November 2025 (GOV.UK) (paragraphs 2.1, 2.2, 2.5, 3.1 to 3.4 and 3.10: definition, exclusions, approval process, £300,000 Chief Secretary threshold).

This is an independent guide and is not affiliated with the NHS, NHS Employers or HM Treasury. Exit payment rules are fact-sensitive and the figures here are the rules as verified on 11 November 2026; always confirm your own position with payroll, HR or your union before relying on them. Always check your ESR record for your actual entitlement.