Imminent changes to termination payments
From 6 April a new employers’ class 1A National Insurance contribution (NIC) of 13.8% will be chargeable on any termination payments in excess of £30,000
This brings the treatment of termination payments for NIC purposes in line with the rules on the income tax treatment of termination payments, where income tax is already payable on termination payments above this threshold.
According to HM Treasury the change will ‘deliver an important simplification of the UK tax system’. It is of the view that because termination awards are subject to different tax and NI treatments this causes confusion for employers.
This change was initially due to take place in April 2018. The revised implementation date may have slipped under the radar for some employers, but it is a significant development. It will mean additional costs and increased administration for employers where the termination payment is more than £30,000.