NIM13206 - Class 1A NICs: liability for Class 1A NICs: Class 1A NICs on termination awards: example 3 – cash and gifted benefit-in-kind

Anita has had her employment with YYYY terminated. She receives a payment of £100,000 when her employment is terminated, the payment is made up of the following elements:

• £35,000 in earnings, taxable under section 62 of ITEPA 2003
• £15,000 as compensation for not having to work a notice period (Post Employment Notice Pay, PENP)
• £10,000 as the value of the company car Anita has been given as part of the package
• £40,000 as compensation for loss of employment.

Class 1 NICs are due on £50,000 (made up of £35,000 earnings and £15,000 pay in lieu of notice).

The termination award consists of £50,000 (£40,000 cash and £10,000 cash value of the car)

The threshold is applied to the full £50,000 with Class 1A NICs at 13.8% being due on that which exceeds £30,000.

£50,000 − £30,000 = £20,000 × 13.8% = £2,760.00.

£2,760.00 is paid through RTI at the time it is paid.