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 13.8% (15.05% for payments in the period between 6 April 2022 and 5 November 2022 - see NIM01600 for more information) being due on that which exceeds £30,000.
£75,000 − £30,000 = £45,000.
Class 1A NICs due
£45,000 × 13.8%=£6,210.00 (which must be paid and reported in Real Time).