The Queen is taking her annual summer holiday at Balmoral, however before taking her well-earned rest, she signed a long-awaited piece of legislation. The much anticipated Class 1A National Insurance Contributions (NIC) charge on termination payments received Royal Assent on 24 July 2019.
This piece of legislation was postponed, having initially been suggested back in 2017 as part of the Finance Bill adjustments to the treatment of Pay in Lieu of Notice payments.
What does this mean for employers?
Well, from 6 April 2020 any employer providing a termination payment in excess of £30,000 will be hit with an employers’ NIC liability of 13.8% of the amount over the £30,000 threshold. The charge will be reported through the real time information (RTI) process, in comparison to BIKs (benefits in kind) which are reported on P11D (b).
Employers will, therefore, need to factor this additional cost into discussions and negotiations with employees who are leaving and paid in excess of the statutory redundancy amounts.
For more details contact Paul Chappell, Head of Legislation and Compliance, on 03331 123456