If your business gives staff anything beyond salary, whether a company car, private medical cover, a gym membership or an interest-free loan, then every summer you have a bill to settle that is easy to forget until it is nearly due. It is called Class 1A National Insurance, and it is the employer’s National Insurance on the benefits you provide.
Unlike the National Insurance on wages, this one lands once a year rather than every payday, which is why it catches people out. The forms fall due in early July and the payment a fortnight later, and the penalties for missing them add up quickly.
This guide explains what Class 1A is, what it is charged on, how the 15% is worked out, when it has to be paid, and how to plan for it so it never arrives as a surprise.
What Class 1A National Insurance Is
Class 1A is a National Insurance charge paid by employers on most taxable benefits in kind, the non-cash perks you give employees and directors on top of their pay.
Two things set it apart from the National Insurance you pay on salary. It is paid only by the employer, so nothing comes out of the employee’s pocket, and it is separate from the Income Tax the employee pays on the same benefit through their tax code. A single benefit can therefore cost you Class 1A while also costing your employee some Income Tax.
The benefits are reported to HMRC on a P11D for each employee, and the total National Insurance due is declared on a single employer form, the P11D(b). If you already tax some benefits through your payroll under voluntary payrolling, those do not go on a P11D, but you still file a P11D(b) to declare the Class 1A on them.
What It’s Charged On, and What Isn’t
Most taxable benefits attract Class 1A. The common ones include:
- Company cars and private fuel: the classic benefit, and often the largest single figure on a P11D.
- Private medical and dental insurance: where the employer arranges the cover, charged on the premium paid.
- Beneficial loans: interest-free or low-interest loans where the total outstanding across all such loans passes £10,000 at any point in the year.
- Living accommodation: where the business provides somewhere to live.
- Gym memberships and similar perks: anything with a cash value that isn’t otherwise exempt.
A fair number of things are exempt, so not every perk creates a bill. Employer pension contributions, cycle-to-work bikes within the scheme limits, and genuine reimbursed business expenses all fall outside Class 1A. So do trivial benefits, as long as they cost £50 or less and are not cash, contractual, or a reward for work, though directors of close companies are capped at £300 of them a year. If you are unsure whether something counts, it is worth checking before the benefit is given rather than after.
How the 15% Is Calculated
The calculation itself is simple. You take the taxable value of each benefit, known as its cash equivalent, add them up across every employee, and charge 15% on the total.
The 15% rate is worth a note in its own right. It rose from 13.8% on 6 April 2025, so the bill on the same set of benefits is now higher than it was two years ago, and the increase applies to every category of benefit.
Imagine a small company with these benefits in a year:
- Private medical insurance for four employees, at a cash equivalent of £600 each, so £2,400 in total.
- A company car for the director, with a cash equivalent of £7,200.
The total cash equivalent is £9,600. Class 1A at 15% comes to £1,440. That figure goes on the P11D(b), and it is what you pay HMRC in July.
The rule of thumb worth keeping in mind is that every £1,000 of benefits you provide adds £150 to your National Insurance bill, before you even count the tax your employee pays on it.
The July Deadlines
Class 1A trips employers up because the reporting and the payment fall on two different dates a couple of weeks apart, and the same dates come round every year. Once the tax year ends on 5 April, the deadlines that follow are:
- 6 July: file your P11D and P11D(b) forms with HMRC, and give each affected employee a copy of their benefit information. Filing is online, as HMRC stopped accepting paper forms some years ago, unless your business is digitally exempt or has stopped trading.
- 22 July: pay your Class 1A National Insurance if you pay electronically.
- 19 July: the earlier date if you pay by cheque, where the funds must reach HMRC rather than simply be sent.
Where 19 or 22 July falls on a weekend, the money has to clear by the last working day before, so it is safer to send it in good time rather than on the day.
When you pay, use your Accounts Office reference followed by four digits, the tax year and the number 13. For the 2025/26 year that suffix is 2613. Getting it right matters, because a payment that arrives without the correct suffix can be allocated to the wrong period.
Planning Ahead to Keep the Bill Down
Because Class 1A arrives as a single sum in July rather than spread across the year, it pays to plan for it rather than let it land. A few things make a real difference.
The clearest is the choice of company car. Broadly, the cash equivalent of a car is its list price multiplied by an appropriate percentage set by its CO2 emissions, so a cleaner car carries a far smaller benefit, and a far smaller Class 1A bill. Accessories, any capital contribution the employee makes, and how long the car is available can all adjust the figure, so the real calculation is a little more involved than a single sum.
Imagine two directors, each given a car with a £40,000 list price. One is fully electric, charged at 3% for 2025/26, giving a cash equivalent of £1,200 and Class 1A of £180. The other is a petrol model whose emissions put it at a 30% rate, giving a cash equivalent of £12,000 and Class 1A of £1,800. Same list price, ten times the National Insurance.
Two more habits help. If you add a benefit partway through the year, such as a health scheme in the autumn, remember the Class 1A bill will follow the next July, so budget for it at the time. And where a benefit is provided through salary sacrifice, special rules can change the amount the charge is based on, so it is worth taking advice before setting one up.
What Happens If You Miss the Deadline
The penalties are steep, and they stack. The filing deadline is 6 July, but HMRC does not start charging the late-filing penalty until the P11D(b) is still outstanding after 19 July, at which point it is £100 for every 50 employees for each month, or part month, that the form is late.
Late payment is treated separately. Interest runs on unpaid Class 1A from the payment due date, the 19th or 22nd, and if the amount is still outstanding 30 days after that, a penalty of 5% is added, with further 5% charges at six and twelve months. An incorrect P11D can carry a penalty of its own, so accuracy matters as much as timing.
What’s Changing: Mandatory Payrolling from 2027
The July routine is going to change, though not all at once. HMRC is moving benefits reporting into real-time payroll, so that the taxable value of a benefit, and the Class 1A on it, is put through your payroll each pay period rather than reported once a year on a P11D.
The change is phased:
- From April 2027: it applies to company cars, car fuel, vans and van fuel, and employer-provided medical benefits.
- From April 2028: it extends to most remaining benefits in kind.
- Loans and accommodation: these stay outside mandatory payrolling until a date HMRC has yet to confirm.
For the benefits that move first, the Class 1A on them will be paid month by month through your payroll rather than as a single sum the following July. HMRC has said it will take a light touch on certain non-deliberate errors in the first year, but it is still worth using the time to check your benefits, update your payroll software, and prepare any staff whose take-home pay will show the change. Until a benefit is brought into the new system, the P11D and July payment carry on as normal, so the 2026/27 year still runs the traditional way.
How Double Point Can Help
Benefits reporting is one of those jobs that looks small until the figures are scattered across HR, the accounts and a director’s car paperwork, and the deadline is a fortnight away.
At Double Point, our team handles the whole of it, identifying which benefits attract Class 1A, calculating the cash equivalents correctly, filing your P11D and P11D(b) on time, and telling you exactly what to pay and when.
We can also help you plan the year ahead, so the July bill is one you have already budgeted for, and get you ready for the shift to mandatory payrolling. You can see what we offer on our payroll page.
If your benefits bill is creeping up, or you would rather not think about the July deadlines again, book a free consultation and we’ll take care of it.