Budget 2016: Issues For Employers

Summary and implications

We have set out below the main employment-related issues coming out of Budget 2016. The devil may yet be in the detail of initiatives, but this alert should serve to make sure employers know what to expect going forward.

Termination payments

Employers often take advantage of certain termination payments being exempt from both employee and employer National Insurance Contributions (NICs) and the first £30,000 not being subject to income tax. Termination payments are often structured in a way to minimise the tax and NICs due but the complex rules can lead to misunderstandings and manipulations.

From April 2018, the government will tighten the scope of the exemption to prevent payments from being manipulated to avoid tax and NICs. The intention is that employer NICs will be payable on payments above £30,000 that are subject to income tax. The first £30,000 of a termination payment will remain exempt from income tax and the full termination payment...