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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: income from employment

Zara's employer pays £20,000 directly into her registered occupational pension scheme in 2025/26. Which statement is correct for the employer's contribution?

The employer's contribution creates no taxable benefit and no NIC, whether Class 1 or Class 1A. It is still included in Zara's pension input for the annual allowance test. The suggestions of Class 1A at 15% or Class 1 NIC wrongly treat the payment as a benefit or earnings.

  1. AIt is a taxable benefit for Zara, but the employer receives a deduction
  2. BThe employer must pay Class 1A NIC of £3,000 on the contribution
  3. CIt gives rise to no taxable benefit and no NIC, but counts towards Zara's annual allowanceCorrect
  4. DEmployer Class 1 NIC of 15% applies to the contribution above £5,000

Explanation

Employer contributions to a registered scheme are not taxable benefits and attract no Class 1 or Class 1A NIC. The £20,000 still forms part of Zara's pension input amount and is tested against her annual allowance. The Class 1A figure of £3,000 (15% × £20,000) and the Class 1 treatment wrongly treat the payment as a benefit or earnings.

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