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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: the use of exemptions and reliefs in deferring and minimising income tax liabilities

Mia is an employee with a salary of £45,000 in 2025/26 and no other income. Her employer pays her a taxable benefit of £4,000 in the form of a company car, on which Class 1A applies. Which statement about national insurance on the benefit is correct using the ATX-UK rates?

Employer Class 1A of £600 is payable and Mia pays no NIC on the benefit. Class 1A is charged at 15% on the £4,000 benefit and is an employer-only liability, so no employee contribution arises.

  1. AEmployer Class 1A of £600 is payable and Mia pays no NIC on the benefitCorrect
  2. BEmployer Class 1A of £600 and employee Class 1 of £320 are payable
  3. CEmployer Class 1A of £400 is payable and Mia pays 2% Class 1
  4. DEmployer Class 1A of £600 is payable and Mia pays 8% Class 1 on the benefit

Explanation

Class 1A is 15% of the benefit, so 15% x £4,000 = £600, and it is borne by the employer only. Employees do not pay NIC on benefits subject to Class 1A, so the options with employee Class 1 are wrong.

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