NIM13204 - Class 1A NICs: liability for Class 1A NICs: Class 1A NICs on termination awards: example 1 – cash only and below £30,000 exemption

Imran has had his employment with YYYY terminated. He receives a payment of £33,000 when his employment is terminated, the payment is made up of the following elements:

• £5,000 in earnings, taxable under section 62 of ITEPA 2003
• £3,000 as compensation for not having to work a notice period. Post Employment Notice Pay (PENP)
• £25,000 as compensation for loss of employment.

Class 1 NICs are due on £8,000 (made up of £5,000 earnings and £3,000 post employment notice pay).

The termination award consists of £25,000.

The threshold is applied to the full £25,000 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.

£25,000 − £30,000 = less than zero so no Class 1A NICs due.