National Insurance liability on benefits in kind

National Insurance contributions that relate to employee benefits are known as Class 1A National Insurance contributions. Employers must pay these National Insurance contributions on most work-related benefits provided to employees, such as a company mobile phone or other non-cash perks.

Class 1A National Insurance also applies to certain termination payments. For example, employers may need to pay Class 1A National Insurance contributions on payments exceeding £30,000 made when an employee’s employment ends, such as redundancy or other termination awards. However, this only applies where Class 1 National Insurance has not already been charged on those amounts.

Timing of payment depends on the nature of the liability. For benefits in kind, Class 1A National Insurance is generally payable annually, with payment due by 22 July following the end of the tax year (or 19 July if paying by post). The payment of Class 1A National Insurance on termination awards is dealt with through PAYE at the time the payment is made.

Late payment can result in interest and penalties, so ensuring timely reporting and payment is important.