What are Class 1A National Insurance Contributions (NICs)?

Class 1A National Insurance Contributions (NICs) represent a specific financial obligation primarily shouldered by employers. These contributions are levied on a wide range of non-cash benefits provided to employees, such as company cars, and on certain termination awards exceeding the £30,000 threshold not already subjected to Class 1 NICs. It’s crucial to note that Class 1A NICs demand no contribution from employees themselves.

Who Pays Class 1A NICs?

Class 1A NICs are applicable to benefits offered to:

• Directors and individuals in controlling positions;
• Employees;
• Family members or household members of the aforementioned groups.

Benefits integrated into salary sacrifice schemes or other optional remuneration arrangements (OpRA) are subjected to specific regulations, with Class 1A NICs calculated as a percentage of the pertinent amount.

Conditions for Class 1A NICs Liability

For Class 1A NICs to be applicable, several conditions must be met:

• The benefit must be related to the employee’s job and subject to Income Tax under the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), specifically general earnings as defined in Section 7(3).
• The employment type must be recognized as ’employed earner’s employment’ under social security legislation, including roles as directors or employees.
• The benefit should not already be liable for Class 1 NICs contributions.

Exemptions and Trivial Benefits

There’s a statutory exemption for minor benefits in kind (BiK) valued at £50 or less. This tax-free exemption covers minor non-cash benefits like a bottle of wine or a bouquet of flowers provided to employees on an occasional basis. Additionally, any other BiK deemed ‘trivial’ and falling within this exemption is also covered. For directors or office-holders of close companies and their families or household members, an annual cap of £300 applies.