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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 1A National Insurance contributions: Special Class 1A NICs cases: Beneficial loans: Method of calculating amount of interest: Averaging method

General

NIM16681 explains there are two methods for calculating the amount of interest chargeable to income tax on beneficial loans, the averaging and the alternative methods.

Using the averaging method – effect on Class 1A NICsIf at the time Class 1A NICs are due to be paid (see

NIM13003)

  • HMRC has not issued a notice to the employee telling him to use the alternative method as per section 183(1) of ITEPA 2003 (before 6 April 2003 – paragraph 5(1) of Schedule 7 of ICTA 1988), or
  • the employee has not elected, by notice to HMRC, that he wants to use the alternative method as per section 183(2) of ITEPA 2003 (before 6 April 2003 – paragraph 5(2) of Schedule 7 of ICTA 1988), the averaging method must be used to calculate the amount of general earnings chargeable to income tax. This is the same amount that Class 1A NICs are due on.

Income tax guidanceFor guidance about the calculation methods see EIM26200 (before 6 April 2003 – SE26200).