ACCA ATX ^UK Syllabus A1. Income tax - Class 1 and 1A NIC - Notes ^{2 / 4}

NIC for the employed

There are 3 types of contributions that are payable for those who are employed:

Employee’s Class 1
Employer’s Class 1
Class 1A

Class 1 Primary is paid by employees

For the tax year 24/25 the rates of employee class 1 NIC is 8% and 2%.

NIC	Paid by	Paid on behalf of	Limits	Rates
Employee’s Class 1	Employees	Employee cash earnings	£0-£12,570	0%
			£12,571-£50,270	8%
			£50,271 - onwards	2%

Illustration - Employee’s Class 1

Cow plc has one employee who is paid £57,000 per year.

Calculate the Class 1 NIC primary payable by the employee.

Solution
Employee’s Class 1 payable:
12,570 * 0% = £0 
£50,270-£12,570 = £37,700 * 8% = £3,016
£57,000 – £50,270 = £6,730 * 2% = £135
Total Employee’s Class 1 NIC payable = £3,151
Note that when you are calculating the NIC payable, you need to start paying from £12,570. Therefore, you will subtract £12,570 from £50,270 and so forth.

Employer’s Class 1 NIC is paid by employers

Employer’s Class 1 NIC is paid by employers on the employee earnings.

There is an employment allowance of £5,000 (given in the exam) available per employer to reduce the employer’s Class 1 Secondary NIC payable.

Note: this allowance is not available to companies where the only employee is the Director.

The rate of employer class 1 NIC is 13.8% and is paid on all earnings over £9,100 in the tax year.
There is no higher limit for the earnings.

NIC	Paid by	Paid on behalf of	Limits	Rates
Employer’s Class 1	Employer	Employee cash earnings	£0-£9,100	0%
			£9,101 onwards	13.8%

Illustration - Employer’s Class 1

Cow plc has three employees who are each paid £55,000 per year.

Calculate the Class 1 secondary payable by the employer in 24/25.

Solution
£9,100 * 0% = £0 
£55,000 – £9,100 = £45,900* 13.8% = £6,334
£6,334 x 3 employees = £19,002
 Less employment allowance = (£5,000)
Total Class 1 Secondary payable = £14,002

Class 1A is paid by employers

Class 1A NIC is paid by employers on behalf of the benefits provided to employees.

Note that you may have to calculate the monetary value of the benefits, and then calculate the Class 1 A NIC payable, based on the benefit's monetary value.

These explanations can be found in the topic The statutory approved mileage allowances and RTI reporting

The rate of employer Class 1 A NIC is 13.8%.

NIC	Paid by	Paid on behalf of	Limits	Rates
Class I A	Employer	Benefits provided to employee	No limits	13.8%

Illustration Class 1A NIC

Jane is employed by Cow plc and earns £25,000 per year.

During 24/25 she received the following taxable benefits:

Car benefit £4,500
Fuel benefit £2,222
Medical Insurance £1,800

Calculate the Class 1A NIC liability in 24/25.

Solution
Car benefit £4,500
Fuel benefit £2,222
Medical insurance £1,800
Total benefits = £8,522
Class 1 A NIC payable = £8,522 * 13.8% = £1,176

Illustration - Calculating monetary value of car benefit

John has been given a petrol car to use for private purposes during the tax year 2024/25.

The car has a list price of £10,000 and it has a CO2 emission of 135g.

What is the monetary value of this benefit?
What will the Class 1 A NIC payable be upon this benefit?

Solution
Calculating the car benefit:
135g-55g = 80g/5g = 16% +16% = 32%
32% * £10,000 = £3,200 is the monetary value of the car benefit
Class 1 A NIC payable = £3,200*13.8% = £442