NIM13003 - Class 1A National Insurance contributions: Liability for Class 1A NICs: General principles

Section 10 of the Social Security Contributions and Benefits Act 1992 (SSCBA 1992)  

Liability for Class 1A NICs arises where:

  • the benefit provided is chargeable to income tax under ITEPA 2003 on an amount of general earnings, section 10(1)(a) of the SSCBA 1992 refers. For more information see NIM13021

And 

  • a liability for UK NICs arises, see NIM13040.

Providing these two primary conditions are satisfied, Class 1A NICs are:

  • a secondary contributor’s liability only, normally an employer’s, except in limited circumstances where a benefit is provided by a third party, see NIM16350
  • payable on most benefits in kind, see NIM13140
  • payable for broadly the same group of employees within employments covered by the benefits code, see section 63 of ITEPA 2003 – see EIM20006. For an exception to this general rule where non cash vouchers are provided by third parties - see NIM16356
  • charged at the secondary (employer) Class 1 NICs percentage rate in force during the tax year in which the benefit is provided, see NIM15020, except for the 2022 to 2023 tax year (see NIM01600)
  • assessed by reference to the cash equivalent of a benefit calculated for tax purposes and reported by employers on form P11D, Return of Expenses and Benefits, see NIM15002
  • payable annually by the 19 July, or 22 July if paying by an approved electronic method, following the tax year in which the benefit is provided
  • reported annually using form P11D(b), Return of Class 1A National Insurance contributions.

Class 1A NICs are not payable by employees. No entitlement to contributory benefits is derived from Class 1A NICs.

Class 1A NICs are also due on Sporting Testimonial Payments (see NIM13302) and Termination Payments (see NIM13201). Where the rules are met Class 1A NICs on these payments are reported through Real Time Information.  

The assessment of Class 1A NICs follows the tax rules for calculating the cash equivalent of a benefit. There are no separate rules for working out the cash equivalent of any benefit for Class 1A NIC purposes. So, before calculating Class 1A NICs liability you must know what the income tax position is and establish the amount of general earnings chargeable to income tax. See NIM16000 for guidance on special cases where the amount of Class 1A NICs due may need to be adjusted or a specific Class 1A NICs exemption exists.

For guidance on

  • calculating the cash equivalent of a particular benefit see NIM13146
  • the conditions which must be satisfied for a Class 1A liability to arise see NIM13021.