Additional functionality to calculate Class 1a National Insurance on termination payments exceeding £30,000.
Release date: 12th March 2020
Reason for Change
In April 2020, new rules about calculating Class 1A National Insurance on Termination Payments come into force.
All HR & Payroll customers using the Payroll module.
Please note – the functionality will be available only after portals have been rolled forward into the 2020/2021 tax year
A new flag has been created within the Payment Type which, if ticked, will automatically calculate both tax and Class 1A National Insurance on any payments over £30,000.
- To find the Payment Type flag, go to Payroll Administration > Payment types > Add New Payment Type
Fig.1 –New ‘Class 1A’ flag in Add Payment Type screen
To create a Termination Payment Type:
- Enter a Description
- Tick Taxable
- Tick One off Payment Type
- Tick Class 1A NIC payment only
- Select Save
Fig.2 - Termination Payment Type
The payment type will then be available to assign to employees.
When the ‘Termination’ Payment Type is used, it will show as normal against an employee record.
- To view the payment go to Payroll > Pay Runs > Current Pay run list > select Pay Run
- Search for the Employee
Fig.3 - Employee Payment Type
The calculation for both tax and Class 1A National Insurance is based on any amount over £30,000.
- To view the Class 1A and Tax, go to Summary
When Class 1A is calculated, it will show under 'Class 1A (Term Awards)'
Fig.4 - Employee Payroll Summary
Further information regarding reporting will be released soon.