NIM13205 | Class 1A NICs: liability for Class 1A NICs: Class 1A NICs on termination awards: example 2 – cash only and exceeds £30,000 threshold

Conchita has had her employment with TTTT terminated. She receives a payment of £100,000 when her employment is terminated, the payment is made up of the following elements:

• £15,000 in earnings, taxable under section 62 of ITEPA 2003

• £20,000 as compensation for not having to work a notice period (Post Employment Notice Pay, PENP)

• £75,000 as compensation for loss of employment.

Class 1 NICs are due on £35,000 (made up of £15,000 earnings and £20,000 post employment notice pay).

The termination award consists of £75,000.

The threshold is applied to the full £75,000 with Class 1A NICs at 15% being due on that which exceeds £30,000.

£75,000 − £30,000 = £45,000.

Class 1A NICs due

£45,000 × 15%=£6,750.00 (which must be paid and reported in Real Time).