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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 1B NICs: liability: calculation: example

800 employees pay tax at the basic rate and 200 pay at the higher rate.

The value of items covered by the PSA which give rise to a Class 1 and Class 1A liability is £50,000.

The tax and Class 1B NICs payable under a PSA for 2003/04 and covering the whole workforce would be calculated as follows:

Value of benefits provided to basic rate employees (800 x £50) = £40,000
   
Tax due @ 22% on £40,000 = £8,800
Gross up tax £8,800 x 100/100 - 22 = £11,282.05
Value of benefits provided to higher rate employees (200 x£50) = £10,000
Tax due @ 40% on £10,000 = £4,000
Gross up tax £4,000 x 100/100 - 40 = £6,666.67
Total Tax Due = £17,948.72
Value of items liable for NICs = £50,000
Class 1B NICs Due (£17,948.72 + £50,000) x 12.8% = £8,697.44