What is Class 1A National Insurance?

Employers are required to pay Class 1A national insurance contributions to HMRC if they give a qualifying benefit in kind to an employee for example a company car.

Class 1A national insurance contributions are specifically for employers meaning individuals do not need to contribute to class 1A NICs.

An employer may need to pay class 1 NICs for directors, individuals in controlling positions, employees paid under PAYE, and the family members or household members of the aforementioned individuals.

There is no need to pay class 1A national insurance contributions for benefits in kind that are subject to class 1 national insurance contributions which are payable by employees only.

Employers should use information from form P11d expenses and benefits to help calculate their class 1A NIC liability.

What qualifies for class 1A national insurance contributions?

There are specific requirements that need to be met in order for class 1A national insurance contributions to be applicable.

These requirements include:

• The benefit must be received or obtained as a result of an individual’s employment and must be subject to Income Tax under ITEPA 2003, based on the amount of general earnings defined in section 7(3) of ITEPA 2003.
• The employment must fall under the category of “employed earner’s employment” as defined by social security law, whether it be as a director or an employee.
• The benefit should not already be subject to a liability for class 1 national insurance contributions.

Common taxable benefits that attract class 1A national insurance include:

• Company cars.
• Mobile phones.
• Private healthcare.
• Termination awards exceeding the £30,000 threshold that have not already been subject to class 1 NICs deductions.

What doesn’t qualify for class 1A national insurance?

Certain payments that are exempt from class 1 national Insurance contributions also do not require class 1A national insurance contributions.

Examples of such payments include redundancy payments and payments or contributions towards specific expenses that an employee incurs while carrying out their employment like washing a uniform worn at work.

If any of the following conditions are met class 1A national insurance contributions will not be required:

• If an employee receives a non taxable benefit in kind.
• If the employee’s employment does not fall under the category of “employed earner’s employment”.
• If the benefit is covered by a PAYE settlement agreement.
• If the benefit is solely for business use or primarily for business use with no significant private use.
• If the benefit is exempt from class 1A national insurance contributions.

Trivial benefits

No payment of class 1A national insurance contributions is required for an employee benefit if the following conditions are met:

• The cost of providing the benefit is £50 or less.
• The benefit is not in the form of cash or a cash voucher.
• The benefit is not given as a reward for the employee’s work or performance.
• The benefit is not provided under the terms of the employee’s contract or through salary sacrifice.

This type of benefit is referred to as a “trivial benefit.” It is not necessary to pay tax or national insurance on it, and there is no need to inform HMRC about it.

Are class 1 and class 1A national insurance contributions different?

Yes, class 1 and class 1A national insurance contributions are different but both are paid to HMRC.

Class 1 national insurance contributions are made by employees only through PAYE and the class 1A type is specficially payable by employers.

There is also a class 1B national insurance for employers who enter a PAYE settlement agreement with HMRC.

P11D(b) and how to pay class 1A NIC’s

Employers should inform HMRC about the Class 1A national insurance by completing and submitting a P11D(b) form.

The P11D(b) form serves the purpose of notifying HMRC about the taxable benefits’ value and the corresponding amount of class 1A national insurance that needs to be paid.

When it comes to paying class 1A national insurance contributions to HMRC the timing depends on whether they are related to work benefits or termination awards.

For work benefits  it is necessary to make the contributions by 22nd July annually for the previous tax year. If you choose to pay by post, the deadline is 19th July.

In the case of termination awards the class 1A contributions can be made through PAYE.

To avoid interest charges and penalties you should ensure that you make your payment to HM Revenue and Customs before the specified deadline.