What is class 1A NICs
If you’re the kind of employer that loves lavishing their employees with benefits in kind, then firstly, how do we apply for a job? And secondly, you should probably be aware of Class 1A National Insurance Contributions.
Class 1A NICs (National Insurance Contributions) is the national insurance that employers are required to pay on behalf of their employees to HMRC for benefits in kind given to their employees. The payment needs to be made directly by the employer, so you can’t be deducting it from employee salaries. These contributions are used to fund the UK’s social security programs.
Benefits that are subject to Class 1A NICs may include things like company cars, private medical insurance or beneficial loans. Class 1A NICs are payable for regular employees, directors and any family members or members of the household who also receive benefits. There is an exception for ‘smaller’ benefits, which are £50 or less (check out our blog on ‘Trivial Benefits’ for more information on these).
The Class 1A charge applies to all taxable benefits (unless exempt or within the charge to Class 1), regardless of the earnings rate of the employee receiving the benefit or expense, although several conditions must be met for Class 1A NICs to apply:
- The benefit must not already incur a Class 1 NIC liability.
- The benefit must be related to employment.
- The benefit must be subject to Income Tax.
The Class 1A NIC is usually a percentage of the monetary equivalent of your employee’s benefit. This monetary value is also what is expected to be reported on your P11D form.
The percentage rate for the 2024/25 tax year on Class 1A NICs is 13.8%.
You can find more details about Class 1A National Insurance in this guide from GOV.UK.
How are class 1A NICS calculated
It’s pretty straight-forward to calculate Class 1A national insurance. Simply calculate the total taxable value of the benefit provided to your employees. Then, multiply this total by the Class 1A National Insurance rate, which is 13.8% for the current tax rate.
How to report your contributions
To report Class 1A NICs to HMRC, you need to submit a P11D(b) form by the 6th of July following the end of the tax year.
This form provides HMRC with details about the value of taxable benefits and the corresponding amount of Class 1A National Insurance owed.
How to pay class 1A NICS
You can pay by Faster Payments, CHAPS or Bacs to HM Revenue and Customs’ (HMRC) account.
| Sort code | Account number | Account name |
| 08 32 10 | 12001039 | HMRC Cumbernauld |
You will have to provide a 17-character number as the payment reference. This starts with your 13-character Accounts Office reference number (you can find this on the letter you received from HMRC when you first registered as an employer, so get digging through those cupboards!).
Then, somewhat confusingly, add the tax year you want to pay for and the digits ‘13’ to make sure your payment is assigned correctly – so if you’re paying the tax year 24-25, you would add the 4 digits, 2513 to your 13-character Accounts Office reference number.
You can also pay from an overseas account with the following details:
Account number (IBAN): GB62BARC20114770297690
Bank identifier code (BIC): BARCGB22
Account name: HMRC Cumbernauld
Some banks will charge you if you do not pay in pound sterling.
HMRC’s banking address is:
Barclays Bank PLC
1 Churchill Place
London
United Kingdom
E14 5HP
What benefits are subject to class 1A NICS?
Here are some examples of benefits that attract Class 1A National Insurance:
- Company cars
- Living accommodation
- Private medical insurance
- Termination awards exceeding the £30,000 threshold that have not already been subject to class 1 NICs deductions.
- Beneficial loans
When are you exempt from paying Class 1A NICS?
You don’t have to pay Class 1A National Insurance contributions if:
- Your employee receives a non-taxable benefit in kind.
- The beneficiary does not meet the criteria for “employed earner”.
- The benefit is included in a PAYE settlement agreement. ’
When to pay your contributions
You must pay Class 1A National Insurance contributions on work benefits you give to your employees,. You must also pay them on payments of more than £30,000 that you make to employees when their employment ends, such as a redundancy payment (‘termination awards’).
You only have to pay Class 1A National Insurance contributions on termination awards if you have not already paid Class 1 National Insurance contributions on them.
When you pay Class 1A National Insurance contributions depends on whether they are work benefits or termination awards.
Work benefits
You need to pay contributions on work benefits by 22 July each year for the previous tax year. You’ll need to pay by 19 July if paying by post.
Termination awards
You pay contributions on termination awards through PAYE.
Pay contributions on work benefits online
You can pay online by:
- approving through your bank account
- Direct Debit (pay automatically or one-off payment)
- debit or corporate credit card
Make sure you pay HM Revenue and Customs (HMRC) by the deadline. You may have to pay interest and penalties if your payment is late.
Key dates
6th July – Due date for submission of P11D forms
19th July – Payment due on work benefits for the previous tax year (if paying by post)
22nd July – Payment due on work benefits for the previous tax year for anyone not paying by post
Here at HRD, we’re always on hand to answer any questions you may have or help you better understand your Class 1A NICs contributions. Get in touch with our expert team today via email or call us on 01244 831 277.