Debt and Redundancy: What to Do If You Lose Your Job

Step 1: Understand your money coming in

Start by working out exactly what you will have, and when.

• Final pay: Your last wages, holiday pay owed and any notice pay
• Redundancy pay: Employees with enough service may be entitled to statutory redundancy pay, and some employers offer more. Check the rules on GOV.UK and ask your employer for a written breakdown.
• Benefits: Universal Credit or other support, which can take weeks to start
• Other income: Partner's earnings, savings, or any insurance that pays out

Step 2: Claim support straight away

Apply for benefits as soon as you can, because there is often a waiting period. Universal Credit can include help with housing costs, and an advance payment may be available to cover the wait, though it must be repaid. Check eligibility for Council Tax Reduction, and use a benefits calculator on GOV.UK to look for other help. See IVA and Universal Credit for how benefit income interacts with debt solutions.

Step 3: Protect your priority bills

List what you must pay to keep a roof over your head and the lights on. These are priority debtsPriority and Non-Priority Debts ExplainedLearn which UK debts are priority debts, such as rent, council tax and energy bills, which are non-priority, and why the difference matters.Read more →: rent or mortgage, council tax, energy, and anything with serious consequences if unpaid. Pay these before credit cardsHow Credit Cards Work in the UKHow UK credit cards work: interest, APR, minimum payments, interest-free periods, fees, Section 75 protection and how to use a card without getting into debt.Read more →, loans and catalogues. See priority and non-priority debts. If you cannot keep up, speak to your landlord or lender straight away.

Step 4: Tell lenders and creditors early

Contact the companies you owe before you miss a payment. Explain that you have lost your job, say how long you expect it to last and ask what help is available. Many offer payment holidays, reduced payments or interest freezes for a time. Mortgage lenders are expected to work with borrowers in difficulty, and you may be able to switch to interest-only for a period. Support for Mortgage Interest, a government loan for some benefit claimants, may help with mortgage costs. Get everything in writing. See how to deal with creditors and mortgage arrears.

Step 5: Cut costs without cutting essentials

Look at your outgoings with fresh eyes.

1. Cancel or pause subscriptions and non-essentials.
2. Review contracts such as broadband, mobile and insurance and move to cheaper deals where it will not trap you.
3. Use local help: Some areas run hardship funds, food banks and community schemes.
4. Check energy: Ask your supplier about payment plans and support. See energy debt help.

Step 6: Avoid borrowing to cover the gap

Taking out payday loansPayday Loan Debt Help: Your Rights and OptionsStruggling with payday loan debt? Learn the FCA price cap, what lenders should do, how to cancel a continuous payment authority and where to get free help.Read more →, running up cards or borrowing against your home can make things worse. If you must borrow, look at the cheapest options first and understand the cost. A credit union may be a safer source than high-cost lenders. See personal loans explained. Try to make your redundancy pay and benefits cover the gap, and get free advice before taking on new credit.

Step 7: Get free advice early

Speak to a free adviser at StepChangeStepChange Explained: What It Does and How It WorksWhat the debt charity StepChange offers, how its free debt advice and debt management plans work, who it suits and what to expect when you contact them.Read more →, National DebtlineNational Debtline: How It Works, When to CallWhat National Debtline is, who runs it, what it can help with, how to get free advice by phone, webchat or online tools, and what to expect.Read more → or Citizens Advice as soon as you are worried. They can help you budget on a lower income, negotiate with creditors and tell you about Breathing Space if you need time. If you already have a plan in place, see missed DMP payment. See also free debt advice in the UK.

If you are self-employed or lose contracts

The same principles apply, but the support is different. Check whether you can claim Universal Credit, tell HMRC if you cannot pay tax and keep records of lost work. See HMRC tax arrears and Time to Pay and business debt help.

Looking ahead

Once the first shock has passed, build a plan. Decide what you will do if the search for a new job takes longer than expected, and start rebuilding savings when you can. Our guide to building an emergency fund explains how to do it in stages.

A worked example

Priya is made redundant with a month's notice and a redundancy payment equal to a few months' take-home pay. She lists her essentials, finds they come to £1,600 a month and calculates how long her payment will last. She applies for Universal Credit on day one, phones her mortgage lender to explain, asks her energy supplier about a payment plan and pauses a subscription she does not need. She keeps her credit card payments at the minimum and does not borrow more. Three months later she finds work, with a clean record and her savings mostly intact. The difference was acting early and calmly.

Looking after yourself

Job loss is stressful, and money worries make it harder. Tell someone you trust, keep a routine and ask for help. If your mental health is suffering, speak to your GP. Debt advisers understand how stress and money interact, and many can take your health into account.