Class 1A National Insurance contributions on termination payments

24 September 2018

Following a discussion at HMRC’s Employment and Payroll Group (EPG) meeting on Friday 21 September we now know that the proposed Class 1A National Insurance contributions on termination payments will not be reported through the FPS for 2019-20.

However, it was confirmed that the Government does still intend to impose an employer Class 1A NICs liability on the taxable portion of a termination payment, but Ministers have not yet decided on an implementation date. 

Even at this late stage, implementation from April 2019 is still a possibility, but if it is implemented for the 2019-20 tax year it is more likely, at least as an interim arrangement, to be an annual charge reported and payable in July 2020 on a P11D(b) along with other Class 1A NICs liabilities, though we know that in the longer term the Government is still intending that payment would be in real time.

There is still much to be confirmed, not least because we still don’t have a definite implementation date, but if payroll software is going to help employers keep track of the payments they have made and calculate the Class 1A arising then we need that confirmation quickly.

We also need very clear and comprehensive guidance to help employers navigate through this process, both for the interim and longer term. 

To remain up to date on Termination Payments, book your place on this half-day training course covering common termination payments, their calculation, tax and NICs treatment and changes in the treatment of payments from April 2018.

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