On 3 March 2007, Nicholls was dropped for Leeds' home match against Sheffield Wednesday. In his post-match interview, Wise stated that Nicholls had asked to leave the club and return to his former club Luton Town. However, Wise demanded that he would not allow Nicholls to return to Luton unless the original fee of £700,000 was to be paid back to Leeds. It was also stated that Nicholls had been stripped of the captaincy. He has since become somewhat of a hate figure amongst Leeds fans. He ended the season having made just 15 appearances in all competitions, with his last game for the club coming in late February.