Termination payments to attract NIC from 2018

Posted on: March 16th, 2016

Regulars at our seminars and those who attended our workshop last month on settlement agreements will remember that we talked about the Government’s consultation over the tax free nature of termination payments up to £30,000.

In today’s budget, George Osborne clarified the Government’s position and confirmed that from April 2018 employer National Insurance contributions will be payable on the element of any termination payments which exceeds £30,000.

The £30,000 exemption from income tax will continue to apply and the entire termination payment will be exempt from employee National Insurance contributions.

Although this means that some employers will face bigger bills when making severance payments from April 2018, it’s very different to what was originally being discussed and means that it won’t be harder for employers to convince employees to sign up to settlement agreements: just slightly more expensive in some cases.