Class 1A National Insurance on Benefits

Introduction

If you provide benefits in kind to your employees—such as a company car, private medical insurance, or gym membership—you'll usually need to pay Class 1A National Insurance contributions (NICs) on the value of those benefits. Class 1A NICs are an employer-only contribution paid annually, separate from the standard monthly National Insurance you deduct from employees' wages. Understanding how to calculate these contributions and when to pay them is essential to avoid penalties.

What is Class 1A National Insurance?

Class 1A National Insurance is a type of employer contribution paid on certain benefits and expenses you provide to your employees. Unlike Class 1 NICs (which are deducted from employees' wages), Class 1A is paid only by the employer—employees don't contribute anything towards it.

You pay Class 1A NICs on the taxable value of benefits in kind after you've reported them to HMRC. This happens once a year, covering the entire previous tax year.

What benefits are subject to Class 1A?

You must pay Class 1A National Insurance on most work benefits you give to employees. Common examples include:

Company cars and fuel
Private medical or dental insurance
Gym memberships
Beneficial loans (below market rate interest)
Living accommodation
Company mobile phones (where multiple devices are provided)
Vouchers and credit tokens

You'll need to calculate the cash equivalent value of each benefit—the taxable amount reported on forms P11D—and then apply the appropriate National Insurance rate to this figure.

Termination awards over £30,000

Class 1A National Insurance also applies to payments exceeding £30,000 made when an employee's employment ends. This includes redundancy payments and other termination awards.

However, you only pay Class 1A on these amounts if you have not already paid Class 1 National Insurance contributions on them. Termination awards are handled differently from standard benefits—you pay the National Insurance through PAYE (your normal payroll system) rather than in the annual Class 1A payment.

How to calculate Class 1A National Insurance

The calculation is straightforward:

1. Work out the total cash equivalent value of all taxable benefits provided to employees during the tax year

2. Multiply this total by the Class 1A National Insurance rate

You report the taxable value of benefits on form P11D(b), which summarises all benefits provided across your workforce. HMRC uses this form to calculate the Class 1A National Insurance due.

The specific rate of Class 1A National Insurance will match the secondary (employer) rate of Class 1 National Insurance for the relevant tax year.

When to pay Class 1A on work benefits

You must pay Class 1A National Insurance on work benefits by 22 July each year for the previous tax year. If you're paying by post (cheque), the deadline is earlier: 19 July.

For example, for benefits provided during the 2024/25 tax year (6 April 2024 to 5 April 2025), you would need to pay the Class 1A contributions by 22 July 2025.

How to pay Class 1A National Insurance

Online payments

The quickest way to pay is online. You can:

Approve a payment through your online or mobile banking (usually same or next day)
Set up a Direct Debit for automatic or one-off payments
Pay by debit or corporate credit card

Bank transfer

You can make a bank transfer using Faster Payments, CHAPS, or Bacs. Use these HMRC bank details:

Sort code: 08 32 10
Account number: 12001039
Account name: HMRC Cumbernauld

Payment reference

You must use a 17-character payment reference number. This starts with your 13-character Accounts Office reference number (found on the letter HMRC sent when you first registered as an employer).

Add the tax year and the digits '13' to your reference. For the 2024/25 tax year, add '2513'. For example, if your Accounts Office reference is 123PA00012345, your payment reference would be 123PA000123452513.

Payment timing

Different payment methods take different amounts of time to reach HMRC:

Same or next day: Online banking (Faster Payments), CHAPS, debit or corporate credit card
3 working days: Bacs transfer, cheque by post, existing Direct Debit
5 working days: New Direct Debit (first time setup)

Make sure you allow enough time for your payment to reach HMRC by the deadline. If the deadline falls on a weekend or bank holiday, your payment must arrive in HMRC's bank account on the last working day before.

Important notes on payments

You must make a separate payment for Class 1A contributions—you cannot add them to your standard monthly PAYE payment
You cannot use an existing Direct Debit set up for standard PAYE payments
If you use Direct Debit to pay automatically, HMRC will collect payment shortly after the 22nd of the month or 4 working days after you file your return (if filed after the 19th)

If you have no Class 1A to pay

If you receive a P11D(b) reminder letter from HMRC but haven't provided any taxable expenses or benefits to employees, you need to tell HMRC you have no return to make. You can do this through HMRC's online service using your employer PAYE reference and Government Gateway login details.

Penalties and interest

HMRC may charge interest and penalties if your Class 1A National Insurance payment is late. Make sure you pay by the deadline—22 July for electronic payments or 19 July if paying by post.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.