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Taxation of termination payments

Source: HM Revenue & Customs | | 04/12/2018

In the 2016 Budget, the government announced that termination payments over £30,000 would be subject to employer National Insurance Contributions (NICs) from April 2018. In the 2017 Budget, the government further announced that this change would be delayed for a year with the changes set to come into force from April 2019. A further delay in the implementation of the new rules has now been confirmed, and the introduction of employer NICs on termination payments above £30,000 will now commence from 6 April 2020.

The government had previously confirmed that the £30,000 tax free exemption on termination payments would be retained but that certain payments will no longer fall within the allowance. From April 2020, termination payments over £30,000, which are subject to Income Tax, will also be subject to employer NICs. Non-contractual termination payments of up to £30,000 will continue to remain exempt from Income Tax and employer NICs. The changes will also apply to sporting testimonials of more than the £100,000 lifetime exemption.

It is expected that the any employer NICs due on these termination payments will be collected in 'real-time', as part of the employer’s standard weekly or monthly payroll returns and remittances to HMRC.

 

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McAllisters is a partnership trading from Paxton House, 11 Woodside Crescent, Glasgow providing accountancy and tax services and general business advice and is a member of ICAS (Registration No 0342) and an FCA exempt professional firm (No 301235). Its VAT number is 261 3019 94

McAllisters (Scotland) Ltd is a related business providing tax and business advisory services to McAllisters and its clients. McAllisters (Scotland) Ltd is registered in Scotland (Registration number SC146856). Its VAT number is 624 0564 62.

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