Test and Trace self-isolation payments exempt from NI contributions
09 October 2020
HMRC has confirmed that payments made to individuals instructed to self-isolate by NHS Test and Trace will not be subject to employer or employee Class 1 National Insurance (NI) contributions. Employers will also not be required to pay Class 1A NI contributions in relation to the payments.
It was announced on 20 September 2020, that from 28 September 2020, individuals who are on low incomes and have tested positive for coronavirus, or have been advised by Test and Trace to self-isolate, would be entitled to a support payment equating to £500. This would be available in scenarios where employees cannot work from home and so would have lost income as a result of adhering to self-isolation guidelines. This applies to those who live in England, and who are receiving at least one of the following benefits:
- Universal Credit
- Working Tax Credits
- Income-related Employment and Support Allowance
- Income-based Jobseeker’s Allowance
- Income Support
- Pension Credit
- Housing Benefit
Ordinarily, payments of this nature would be classed as earnings, and so would be liable to both employee and employer Class 1 NI contributions. As local authorities will be responsible for making the payments, they would have to consider this when making payments to eligible individuals, and employers would also need to ensure that they paid employer Class 1 NI contributions on the gross amount received. To avoid these administrative burdens for the one-off payment, a measure has been implemented to ensure that payments of this nature are not subject to NI contributions.
This measure will take effect from 22 October 2020.
The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our Coronavirus hub.