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HMRC internal manual

PAYE Settlement Agreements

National Insurance Contributions and PAYE Settlement Agreements: Items liable for Class 1A NICs

Class 1B NICs replace any Class 1A NICs liability attached to the expenses and benefits included in a PSA for tax purposes.

Most benefits in kind attract Class 1A NICs liability. Employers must account for this liability by 19 July following the end of the tax year in which the benefit arose.

For a PSA to be valid a signed agreement has to be in place before 6 July so Class 1B NICs will always be substituted for items in a PSA which are otherwise liable for Class 1A NICs.

Items attracting Class 1A NICs include,

  • Christmas parties outside section 264 Income Tax (Earnings and Pensions) Act 2003
  • small non cash gifts

Related Guidance

Further information about which class of NICs applies to an item to be included in a PSA can be found at Appendix 1 in the guide ‘Class 1A National Insurance contributions on benefits in kind’ - CWG5.

See PSA3010 for general information about Class 1B NICs and PSA3020 for details of the legislation.

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