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ACCA Applied Skills · Taxation (UK) · National insurance contributions for employed and self-employed persons

Tobias is a director of Calder Ltd and is paid £70,000 in 2025/26. Calder Ltd also pays him a taxable benefit in kind of £5,000 (a company car), which is subject to Class 1A, not Class 1 employee NIC. Using the Class 1 employee rates for 2025/26 (nil to £12,570, 8% to £50,270, 2% above), what is Tobias's Class 1 employee NIC?

Only the £70,000 cash earnings count for employee NIC; the car benefit is charged to employer Class 1A instead. The 8% band gives £3,016 and 2% on £19,730 gives about £395, so the total is about £3,410.

  1. A£3,016 + £394 = £3,410Correct
  2. B£3,016 + £494 = £3,510
  3. C£3,016 + £1,400 = £4,416
  4. D£3,016

Explanation

Benefits in kind are not subject to Class 1 employee NIC. Main band: £37,700 x 8% = £3,016. Upper: (£70,000 - £50,270) = £19,730 x 2% = £394.60, about £395. Total about £3,410. Including the £5,000 benefit would give £494, which is the key mistake in the second option.

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