Termination Payments

From April 2020, HMRC has introduced new rules applicable to the treatment of Sporting Testimonial and Termination Payment income. Employers’ Class 1A NICs and income tax are now due on any payments which exceed the relevant thresholds.

The thresholds for the 2020/2021 tax year are:

• Termination Payments    £30,000

• Sporting Testimonials    £100,000

From April 2020, employers are required to pay Class 1A NICs on any part of a termination payment exceeding the £30,000 threshold. Any payments that are made are to be reported via the Full Payment Submission. Income Tax is also due on any amount exceeding the £30,000 threshold. Payments in lieu of notice (PILONs) are now all taxable and subject to Class 1A NICs.

Sporting Testimonial Payments

From April 2020, employers are required to pay Class 1A NICs on any part of a Sporting Testimonial and benefit match event payment exceeding the £100,000 threshold. Any payments that are made are to be reported via the Full Payment Submission. Income Tax is also due on any amount exceeding the £100,000 threshold. A sportsman could qualify for a one-off tax exemption amount of £100,000 on the income received if:

• They are an employed sportsperson

• They are a previously employed sportsperson and the testimonial relates to that employment

• The testimonial or benefit match is non-contractual or non-customary

• The events are held during a single testimonial or testimonial year

• The events are organised or controlled by an independent person (normally a testimonial committee)

• There has been no previous testimonial income to which the exemption is applied

For further information on Sporting Testimonial Income please see the HMRC Guidance.