The government has announced that the anticipated changes to the employment tax termination payment regime will be introduced with effect from April 2018. With the detail of the proposed changes to be confirmed following the outcome of a further technical consultation, one change already confirmed is the introduction of employer’s national insurance contributions on taxable payments above £30,000. In addition the Government has confirmed that the £30,000 exemption will be retained (at least in some form) and that the full amount of qualifying payments will remain outside the scope of employee’s national insurance.

One of the side effects of the decision to make termination payments of over £30,000 subject to employer’s national insurance contributions is likely to be a reduction in the amounts employers are willing to offer to staff in redundancy situations as they look for ways to absorb the additional costs that the change will bring. In addition, as we get closer to the 2018 implementation date, some employers who are planning to restructure their workforce are likely to look to push their plans forward sooner than might otherwise have been the case, so as to avoid the national insurance charge.

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