The government announced that from April 2020 it will be compulsory for the employer to pay NIC on any part of a termination payment above the £30,000 amount.
Employee Class 1 NIC is not payable on any part of the termination payment.
Any value below £30,000 is exempt for tax and national insurance. When a payment exceeds £30,000, the value exceeding £30,000 is applicable for Employers NI (Class 1A).
Sporting Testimonials which are non-contractual and non-customary, are not subject to tax or NIC up to £100,000.
Over £100,000 the payment are both subject to tax and NIC.
You can find more information here:
Termination payments and sporting testimonials are new payment types which can be found in 'Company > Additions and Deductions'.
When selecting a termination payment it will automatically set the tax option and un-check all other addition options. Sporting Testimonial will do the same but also check NI. Termination payments have fixed addition options and additional options are un-selectable.
As explained in the specification termination payments and sporting testimonials behave differently depending on the total amount taken for the employee in a given period of time.
Rather than the user handling this behaviour the software will calculate it automatically.
A termination payment is entered for £45,000.
During Open and Pay, the software will split the payment automatically. £30,000 will be paid tax free and the remaining £15,000 will be calculated with the relevant tax/NI applied.
The payment will not be displayed separately on the payslip.