Class 1A National Insurance contributions on termination payments 25 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 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.
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Changes to National Insurance contributions 2 November 2018
The following changes were announced in or alongside Budget 2018
Limits and thresholds National Insurance contribution (NIC) limits and thresholds for 2019-20 were published in associated documents, showing: • The weekly Lower Earnings Limit (LEL) increases to £118 (from £116) • The weekly primary and secondary thresholds (PT, ST) increase to £166 (from £162) • The Upper Earnings Limit (UEL), Upper Secondary Threshold (UST) for under 21s and Apprentice Upper Secondary Threshold (AUST) for under 25s increase to £962 a week (from £892) Employment Allowance The Employment Allowance is an annual amount that is currently available to all businesses and charities (with some exclusions) to offset against their Class 1 secondary NICs bill. It remains at £3,000 for 2019-20. It was introduced in April 2014 to support employers to grow and hire new staff. However, it is a flat rate regardless of the size of the employer and is therefore less likely to be an incentive for larger employers. Therefore, the government has decided to target this allowance at smaller businesses. From April 2020, the Employment Allowance will be restricted to organisations with a NICs bill below £100,000 in the previous tax year. Over 99% of micro-businesses and 93% of small businesses will still be eligible for the Allowance. Draft National Insurance contributions Bill The draft National Insurance contributions Bill contained measures to abolish Class 2 NICs – as previously announced in September, this change will not happen take place following concerns raised that they would have an adverse impact on the lowest self-employed individuals The NICs rates remain unchanged.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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