The percentage rate at which Class 1A NICs are calculated is the
secondary (employer’s) not contracted-out Class 1 NICs rate
in force during the tax year in which the benefit is provided.
Although Class 1A NICs are payable by the 19th July (22nd
July if payment is by an approved electronic means – see
NIM13003) in the tax year following the
tax year in which the benefits are provided, the amount due is
always calculated using the percentage rate in force during the
year the benefit was provided.
Because of the retrospective nature of Class 1A NICs -
liability arising in one tax year and payment following in the next
- confusion can sometimes arise about which secondary Class 1 NICs
percentage rate to use. Class 1A NICs are
always calculated using the Class 1 NICs secondary
not contracted-out percentage rate in force during the year in
which the employee enjoys the benefit. Class 1A NICs are not
calculated at the Class 1 NICs rate in force during the tax year in
which Class 1A NICs are paid.
Example
Benefits provided in the 2006/2007 tax year are payable on the 19th or 22nd July 2007 – that is in the 2007/2008 tax year.
Class 1A NICs in respect of benefits provided in the 2006/2007 tax year are calculated at the secondary Class 1 NICs percentage rate in force during the 200062007 tax year.
If an employee is in contracted-out employment, the Class 1A
NICs percentage rate used by the employer to calculate his Class 1A
NICs liability is still that for not contracted-out Class 1 NICs.
This applies whether the employer operates a Contracted-out Money
Purchase Scheme (COMP) or a Contracted-out Salary Related Scheme
(COSR).
For a table showing the secondary not-contracted out rate in
force from the 1991/1992 to the current year, see
NIM15021.
