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Employer NICs on termination payments delayed again

01 November 2018

The Government’s plan to make termination payments in excess of £30,000 subject to employer national insurance contributions (“NICs”) has been delayed for a second time and will now take effect from April 2020.

Recently, the Government has made a number of changes to the tax and NICs treatment of termination payments, and in particular payments in lieu of notice – explained in our Inbrief guide. A key change proposed by the Government back in 2006 was to align the income tax and employer NICs rules, so that payments which qualify for the £30,000 tax exemption would be subject to both income tax and employer NICs on amounts in excess of £30,000.  

Initially this change was expected to be introduced from April 2018, but it was then announced in the autumn 2017 Budget that it would take effect from April 2019. Now, buried in the 2018 Budget papers (at page 42), comes the news that the employer NICs charge on termination payments in excess of £30,000 will be delayed by a further year. It will now only take effect for payments made on or after 6 April 2020. 

The further delay is welcome news for employers as it will help keep the costs of settlement payments down for another 12 months. And remember that, although the employer NICs treatment of termination payments will change in 2020, the existing employee NICs exemption will be retained even if the payment exceeds £30,000.

Our general commentary on the 2018 Budget is available here

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