Employment tax changes

The Treasury has announced that although the National Insurance Contributions Bill will be introduced into Parliament in 2018, the measures contained in it will not take effect until April 2019, one year later than originally planned.

The delay will allow time for consultation on the impact of the abolition of class 2 NICs on self-employed individuals with low profits. This also means that the extension of Class 1A NICs to termination payments in excess of £30,000 will now take effect on 6 April 2019 rather than 6 April 2018. However, it appears that changes to the taxation of payments in lieu of notice (PILONs) will still go ahead in 2018. Accordingly all PILONs, rather than just contractual PILONs, will be treated as taxable earnings from 6 April 2018 meaning that employers may need to review the structure of their termination payments and Settlement Agreements as a result. All employees will pay tax and Class 1 NICs on the amount of basic pay that they would have received if they had worked out their notice in full.