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HMRC internal manual

PAYE Settlement Agreements

National Insurance Contributions and PAYE Settlement Agreements


From 6 April 1999 Class 1B National Insurance contributions were introduced to alignthe NICs treatment of items included in a PSA with the tax treatment. Following thischange an employer who enters into a PSA is liable for the payment of Class 1 B NICs inaddition to their liability to tax under the PSA. The legislation relating to Class 1BNICs is shown at PSA3020

Class 1B NICs are payable on

  • items within a PSA that ordinarily attract a Class 1 PSA3040 or Class 1A NICs liability, PSA3030


  • the total tax payable under a PSA

Class 1B NICs replace any Class 1 or Class 1A NICs liability attached to the benefitsand expenses included in a PSA for tax purposes

Only items that attract a tax charge can be included in a PSA. You cannot usea PSA

  • where there is NICs only liability, or
  • to cover elements which have NICs only liability

More detailed information about Class 1B NICs can be found in the National InsuranceManual at NIM18000 onwards