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.
The government has recently made several changes to the tax and NICs treatment of termination payments, in particular payments in lieu of notice. A key change proposed by the government 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 late 2017 that it would take effect from April 2019. Now, 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 take effect only for payments made on or after 6 April 2020.
The further delay is welcome news for employers as it will help to keep the costs of settlement payments down for another 12 months. In addition, 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.
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This is not legal advice; it is intended to provide information of general interest about current legal issues.