SolvedNIM18080 | Class 1B NICs: liability: calculation: example
From HM Revenue & Customs · National Insurance Manual
Class 1B NICs are payable on:
the value of all items covered by the PAYE Settlement Agreement (PSA) which would normally give rise to a Class 1 or Class 1A liability
the total amount of tax payable by the employer under the PSA.
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 2025 to 2026 tax year and covering the whole workforce would be calculated as follows:
| Type | Amount |
|---|---|
| Value of benefits provided to basic rate employees (800 x £50) | = £40,000 |
| Tax due @ 20% on £40,000 | = £8,000 |
| Gross up tax £8,000 x 100/(100 - 20) | = £10,000 |
| 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 | = £16,666.67 |
| Value of items liable for NICs | = £50,000 |
| Class 1B NICs Due (£16,666.67 + £50,000) x 15% | = £10,000.00 |