Currently, no National Insurance contributions (NICs) are payable on payments made to employees in connection with the termination of their employment - with the exception of payments to which an employee is entitled under their employment contract (for example, contractual notice payments).
In today's budget the Chancellor has announced that from April 2018, employers' NICs will now become due on any part of such a termination payment that exceeds £30,000 - income tax already being payable above that threshold.
With employer NICs currently at up to 13.8%, this will significantly increase the cost to employers of larger severance payments.
17. Employers will pay National Insurance on pay-offs above £30,000 from April 2018 From April 2018 employers will now need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due. For people who lose their job, payments up to £30,000 will remain tax-free and they will not need to pay National Insurance on any of the payment.