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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Exemptions from Class 1A NICs: Benefits exempt from income tax: Tax exemption applies

Section 10(1)(a) SSCBA 1992

NIM14001 lists the circumstances when there will be no Class 1A NICs liability. Class 1A NICs liability can only arise where the benefit provided to the employee is general earnings on which the earner is chargeable to income tax under ITEPA 2003 (before 6 April 2003 – emoluments chargeable to income tax under Schedule E), see NIM13070. Where no tax is chargeable because a statutory tax exemption exists, no Class 1A NICs liability arises. For example, section 264 of ITEPA 2003 exempts from income tax the cost of certain annual parties and functions (see EIM21690 for more information about this exemption). If all the conditions are satisfied so that the tax exemption applies, there will be no Class 1A NICs liability.

Benefits exempt from income taxThe table at

NIM14110 summarises the benefits exempt for tax by statute and indicates where in the EIM and SE Manual guidance can be found. Always consult the guidance to ensure that the necessary conditions for exempting a benefit are met.