National Insurance Contributions changes to termination payments postponed until April 2019

The way that termination payments are taxed is due to change in April 2018 but planned changes to National Insurance Contributions have been postponed until April 2019.

When the Government announced changes to the way that termination payments are taxed, it also announced that employer (but not employee) NICs would be payable on the excess over £30,0000.  This change to the NICs treatment of termination payments has now been delayed until April 2019 but it is understood that the other changes will still come into effect in April 2018.  

The changes still expected to come into effect in April 2018 are as follows:

• all payments in lieu of notice, whether provided for in the contract or not, will be treated as earnings (rather than a termination payment) and will be subject to income tax and employer and employee NICs; and
• payments in respect of injury to feelings will fall outside the exemption for payments made on account of injury or disability, save in cases where the injury amounts to a psychiatric injury.