National Insurance Contributions

Company Cars

If you provide your employees with company cars then employer's National Insurance Contributions are due on the benefit under the 'Class 1A' category of contributions.

How NIC is calculated

Your employer's NIC liability on company cars is based on the same value as the company car benefit for the employee.

Take a look at our explanation of the rules for calculating company car benefit for an explanation of how to calculate the amount liable to employer's NIC.

The amount of employer's NIC due is the taxable benefit multiplied by the appropriate employer's Class 1A NIC rate for the tax year in question.

Company Vans

Company vans are taxed on a fixed annual benefit irrespective of the price/CO2 output of the van. This fixed amount is used as the basis for calculating employer's NIC on the private use of a van.

Fuel Benefit

If an employee receives free fuel for private motoring in a company car or van then the taxable benefit for the fuel is also used to calculate the employer's NIC liability on the benefit.

Cash Allowances

If you provide your employees with a cash allowance instead of a company car, or reimburse them for business or private motoring in their own car, then employer's National Insurance Contributions may be due on the allowances paid.

How NIC on Cash is calculated

For mileage allowances, if the amounts are in accordance with HM Revenue and Customs' MAPS or Advisory Fuel Rates then no NIC is due.

Mileage allowances paid in excess of HMRC authorised mileage rates are typically liable to NIC.

For fixed sum cash allowances, a recent NIC Tribunal ruling means that NIC is not necessarily payable on fixed cash allowances.

The position is complex and is explained here, but employer's and employee's National Insurance Contributions may be reclaimed in certain circumstances on fixed cash allowances.

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(+44 1792 224319 outside UK)