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National Insurance

Termination payments and National Insurance

In an attempt to stop employers wrongly categorising payments to employees as termination payments, which carry a £30,000 Income Tax exemption, from April 2018 the chancellor has confirmed that although the first £30,000 of a termination payment will remain Income Tax free, amounts over £30,000 will also be liable to employer’s National Insurance Contributions

Other previously announced changes which employers need to be aware of are as follows:

Employment Allowance

The employment allowance from April 2016 is £3,000, which is offset against an employer’s Class 1 secondary National Insurance liability.

This is good news for employers and provides a saving on PAYE liabilities.

However, to ensure that the employment allowance is focussed on employers in the UK, it will not be available for companies where the director is the sole employee.  This new criteria came into force in April 2016 and will impact on one man band limited companies.

National Minimum Wage

Just as a recap, from October 2016 the National Minimum Wage rates are:

  • employees aged between 21-24 – £6.95
  • employees aged between 18-20 – £5.55
  • employees aged between 16-17 – £4.00
  • apprentices up to age 19 or in their first year of apprenticeship – £3.40

The above minimum wage rates are legally enforceable.

From April 2016 the new National Living Wage for those aged 25 and over became a compulsory rate of pay, and will be set at £7.20, rising to over £9 by 2020.

Employer’s National Insurance for apprentices aged under 25

From April 2016, there will also be no employer’s National Insurance liability for any apprentices aged 25 and under, unless their earnings exceed the upper earnings limit.

If you have any questions on National Insurance matters our specialists are on hand to help, give them a call on 01228 711888.