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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: calculating Class 1A NICs: percentage rate for calculating Class 1A NICs

Section 10(4) SSCBA 1992

The percentage rate at which Class 1A NICs are calculated is the secondary (employer’s) not contracted-out Class 1 NICs rate in force during the tax year in which the benefit is provided.

Although Class 1A NICs are payable by 19 July (22 July if payment is by an approved electronic means – see NIM13003) in the tax year following the tax year in which the benefits are provided, the amount due is always calculated using the percentage rate in force during the year the benefit was provided.

Because of the retrospective nature of Class 1A NICs - liability arising in one tax year and payment following in the next - confusion can sometimes arise about which secondary Class 1 NICs percentage rate to use. Class 1A NICs are always calculated using the Class 1 NICs secondary not contracted-out percentage rate in force during the year in which the employee enjoys the benefit. Class 1A NICs are not calculated at the Class 1 NICs rate in force during the tax year in which Class 1A NICs are paid.

Example

Benefits provided in the 2006 to 2007 tax year are payable on 19 or 22 July 2007 – that is in the 2007 to 2008 tax year.

Class 1A NICs in respect of benefits provided in the 2006 to 2007 tax year are calculated at the secondary Class 1 NICs percentage rate in force during the 2006 to 2007 tax year.

Employers with contracted-out schemes

If an employee is in contracted-out employment, the Class 1A NICs percentage rate used by the employer to calculate his Class 1A NICs liability is still that for not contracted-out Class 1 NICs. This applies whether the employer operates a Contracted-out Money Purchase Scheme (COMP) or a Contracted-out Salary Related Scheme (COSR).

For a table showing the secondary not-contracted out rate in force from the 1991 to 1992 tax year to the current year, see NIM15021.