The cost of termination payments for United Kingdom employers could increase from 6 Apr 2020 when employers will have to pay National Insurance Contributions (NICs) of 13.8% on any part of an employee’s termination payment exceeding £30,000. Currently, employers only pay income tax on payments to compensate employees for employment loss if the amount exceeds £30,000. The introduction of NICs on termination payments was announced by the government in 2017, but its implementation was postponed from 2018 until 2020.  

Employers should adjust their payroll processes — and factor in the change — when negotiating termination payments after 6 April.  

Related resources

• Employment income manual (HMRC, 5 Feb 2020)
• Income tax and national insurance contributions: Treatment of termination payments (UK government, 5 Dec 2016)