NIM13160 | Class 1A National Insurance contributions: Liability for Class 1A NICs: Importance of identifying whether earnings or benefits are liable for Class 1 NICs or Class 1A NICs

Sections 3 and 10 of the Social Security Contributions and Benefits Act 1992 (SSCBA 1992)

As the manner in which something is provided to an employee normally determines the class of NICs payable, it is important to distinguish between:

• a payment of earnings on which Class 1 NICs are due; and

• the provision of a benefit on which Class 1A NICs are due.

An employee’s entitlement to:

• Statutory Sick Pay

• Statutory Maternity Pay

• Statutory Paternity Pay; and

• Statutory Adoption Pay

can be jeopardised if Class 1A NICs are incorrectly paid on earnings which properly attract Class 1 NICs. The level of student loan re-payments is also tied to the amount of Class 1 NICs on earnings and incorrect identification can cause the loan re-payment to be incorrectly calculated.

See NIM13170 for guidance on how to determine whether, for NICs purposes, a benefit has been provided.