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Taxation of termination payments: employer NIC charges further delayed to April 2020

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In the 2016 Budget, the government announced that termination payments over £30,000 would be subject to employer Class1A national insurance contributions (NICs) from April 2018. Termination payments over the tax-exempt threshold of £30,000 are currently only subject to income tax. In the 2017 Budget, the government announced that this change would be delayed for a year and take effect from April 2019.

However, in the Autumn 2018 Budget earlier this week, the government announced that this change will be further delayed. Subject to any further postponements, employer NICs on termination payments over the £30,000 threshold will now become payable in April 2020.

Whilst most termination payments fall below £30,000, for employers this announcement will come as a welcome, albeit temporary, reprieve from additional costs in those cases where the tax-exempt threshold is exceeded.