Reimbursed business expenses actually incurred by the employee, and for which a proper receipt is available
Use of employer-owned or leased assets, e.g. houses
Medical insurance (e.g. BUPA) arranged by the employer
Class 1 national insurance contributions are payable for 2014/15 as follows (not contracted out rates):
|Nil on first
|0% on next
|12% on next
|Nil on first
|13.8% on balance
||(no upper limit)
Earnings between the lower earnings limit and the earnings threshold protect and entitlement to basic state pension and other contributory benefits without incurring any actual national insurance liability. Details of such earnings must be reported to HMRC under the RTI reporting system, even though no tax or NIC might be payable. The RTI returns must be filed on or before the payments of earnings are made.
Special rules, and a special class of NICs, apply to benefits in kind. Class 1A contributions are payable by employers only. These contributions apply to those taxable benefits which do not attract Class 1 contributions in respect of ‘P11D employees’ (employees earning £8,500 or more per annum, (including benefits), and directors).
The charge is worked out on an annual basis using the cash equivalent of the benefit (as for income tax). The amount of Class 1A contributions is calculated by using information on recorded of Forms P11D and applying the Class 1 employers’ contribution rate for the relevant year (13.8% for 2014/15).
Once the amount of Class 1A contributions has been calculated it must be declared using form P11D(b). This form, and the related payment, must be received by HMRC by 19 July following the end of the tax year to which it relates. In most cases a special Class 1A payslip will be sent to relevant employers in the first week of April.
Dividends instead of salary
You may wish to consider paying dividends rather than taking all your income as salary. Where directors are in receipt of a salary from a company, the NIC cost may be such that part of the payment could be more cost effectively made as a dividend. There are special rules for some companies providing personal services.
The decision on whether to pay a dividend or not is complex because the payment of a dividend may influence the value of the company’s shares and therefore increase the liability to capital gains tax and inheritance tax. There is also a maximum amount that may be paid, based on the company’s results.
Further strategies for minimising national insurance
Clearly there is more need than ever to mitigate NICs. Strategies are limited, but we can help you with ideas for saving employer and / or employee NICs including;
To save NICs: