Employer Class 1A NI on Benefits in Kind 2026/27: P11D Guide
How employer Class 1A National Insurance at 13.8% works on benefits in kind in 2026/27 -- company cars, private medical, fuel benefit, P11D(b) deadline and PSA alternatives explained.
When employers provide non-cash benefits to employees -- company cars, private healthcare, accommodation and more -- they face a National Insurance cost in addition to the income tax their employees pay on those perks. This employer-only charge is Class 1A NI, and understanding how it works is essential for payroll and HR professionals managing employee benefits programmes in 2026/27.
What Is Class 1A National Insurance?
Class 1A NI is a charge payable by employers only at a rate of 13.8% on the taxable value (P11D value) of most benefits in kind provided to employees or their families.
It was introduced in 1991 to create parity between cash remuneration (which attracts employer Class 1 NI) and non-cash benefits (which previously had no employer NI cost). Class 1A does not apply to cash -- that attracts the standard Class 1 NI on payroll.
Key facts for 2026/27:
- Rate: 13.8% of P11D value
- Who pays: Employer only (employees pay income tax, not Class 1A)
- Annual return: P11D(b) due 6 July 2027
- Payment deadline: 22 July 2027 (electronic), 19 July 2027 (cheque)
Which Benefits Attract Class 1A NI?
Most taxable benefits in kind attract Class 1A. The main categories:
| Benefit | Attracts Class 1A? |
|---|---|
| Company car (private use) | Yes |
| Car fuel benefit | Yes |
| Private medical or dental insurance | Yes |
| Accommodation above exempt threshold | Yes |
| Beneficial interest rate loans over £10,000 | Yes |
| Non-business travel and subsistence | Yes |
| Gym membership | Yes |
| Pension contributions by employer | No -- fully exempt |
| Trivial benefits under £50 per occasion | No -- exempt |
| Cycle to Work equipment | No -- exempt |
| One mobile phone per employee | No -- exempt |
| Workplace canteen (all staff) | No -- exempt |
Company Car: A Detailed Calculation
The company car benefit in kind is calculated as:
BIK value = List price x appropriate CO2 percentage
For 2026/27, CO2-based appropriate percentages range from 2% for zero-emission electric vehicles up to 37% for the highest-emitting cars.
Example: Petrol car, list price £35,000, CO2 120g/km
| BIK percentage at 120g/km (2026/27) | 29% |
| P11D value: £35,000 x 29% | £10,150 |
| Employer Class 1A NI: £10,150 x 13.8% | £1,401/year |
| Employee income tax (basic rate): £10,150 x 20% | £2,030/year |
| Employee income tax (higher rate): £10,150 x 40% | £4,060/year |
The employer bears £1,401 in Class 1A NI on top of the running costs of providing the car. Over a typical three-year lease, this adds over £4,200 in Class 1A NI alone.
Example: Zero-emission electric car, list price £45,000
| BIK percentage for EV (2026/27) | 3% |
| P11D value: £45,000 x 3% | £1,350 |
| Employer Class 1A NI: £1,350 x 13.8% | £186/year |
The dramatic difference illustrates why electric vehicles have become the default for company car schemes -- the Class 1A NI saving alone is over £1,200 per year compared to a comparable petrol car.
Use the income tax calculator to see how the BIK value affects an employee tax bill
Fuel Benefit Charge
If an employer pays for an employee's private motoring fuel, the fuel benefit charge applies. For 2026/27, the flat fuel benefit figure is £27,800, multiplied by the same appropriate percentage as the car.
Example: Same 29% BIK car as above
| Fuel benefit: £27,800 x 29% | £8,062 |
| Employer Class 1A NI: £8,062 x 13.8% | £1,113/year |
| Employee tax at higher rate: £8,062 x 40% | £3,225/year |
The fuel benefit is notoriously expensive relative to its value. At lower mileage levels, a higher-rate taxpayer spends more in extra tax than the fuel is worth. Many employers have removed the fuel benefit from their policies.
Private Medical Insurance
Private medical insurance provided by an employer is a P11D benefit in kind. The P11D value is the amount of the insurance premium the employer pays.
Example: Senior manager, individual cover
| Annual premium paid by employer | £1,800 |
| Employer Class 1A NI: £1,800 x 13.8% | £248/year |
| Employee income tax (basic rate): £1,800 x 20% | £360/year |
| Employee income tax (higher rate): £1,800 x 40% | £720/year |
Example: Family cover for director
| Annual premium paid by employer | £4,200 |
| Employer Class 1A NI: £4,200 x 13.8% | £580/year |
The Trivial Benefits Exemption
Employers can provide small gifts and benefits without triggering a P11D or Class 1A NI liability under the trivial benefits exemption:
- The benefit must cost £50 or less per employee per occasion (including VAT)
- It must not be cash or a cash voucher
- It must not be a reward for services performed or performance
- For company directors, the total trivial benefits in a tax year is capped at £300
Typical examples: a bottle of wine at Christmas, a birthday gift, a team lunch. These escape both income tax for the employee and Class 1A NI for the employer.
PAYE Settlement Agreements (PSAs) as an Alternative
A PSA allows an employer to pay the income tax and National Insurance on certain benefits on behalf of employees, rather than reporting them on P11D forms and adjusting employee tax codes. The employer pays Class 1B NI (also 13.8%) instead of Class 1A.
PSAs are commonly used for:
- Staff entertainment events (Christmas parties above the £150 annual exempt amount)
- Irregular one-off gifts that are not trivial benefits
- Benefits that are impractical to apportion among individual employees
- Relocation costs above the £8,000 exemption
PSA applications must be agreed with HMRC in writing before the end of the tax year to which they relate. The PSA calculation grosses up the income tax liability because the employer is paying it on the employee's behalf.
Filing P11D and Paying Class 1A NI
The annual P11D process for 2026/27 benefits:
| Action | Deadline |
|---|---|
| Submit P11D forms for each employee | 6 July 2027 |
| Submit P11D(b) (employer declaration) | 6 July 2027 |
| Pay Class 1A NI electronically | 22 July 2027 |
| Pay Class 1A NI by cheque | 19 July 2027 |
| Provide copy of P11D to employees | 6 July 2027 |
Late filing of P11D attracts penalties of £100 per 50 employees per month. Interest runs on late Class 1A NI from 23 July. A further 5% surcharge applies if payment remains outstanding 30 days later.
Class 1A NI is deductible against the employer's corporation tax liability as an employment cost.
Frequently asked questions
What is Class 1A National Insurance?
Class 1A National Insurance is the employer-only NI charge on most taxable benefits in kind. The rate for 2026/27 is 13.8% of the P11D value of the benefit. Class 1A was introduced in 1991 to ensure employers bear a NI cost on non-cash benefits just as they do on cash salaries. Employees do not pay Class 1A -- they pay income tax on the P11D value through their tax code. Class 1A is reported on form P11D(b) and paid to HMRC by 22 July each year (19 July for cheque payments).
Which benefits in kind attract Class 1A NI?
The majority of taxable benefits in kind attract Class 1A NI. Common examples include company cars, the fuel benefit for private motoring, private medical or dental insurance, accommodation provided above the exemption threshold, loans at beneficial interest rates over £10,000, gym membership, and non-business travel. Expenses that are exempt from income tax (such as pension contributions, trivial benefits under £50, and workplace canteen facilities available to all staff) are not subject to Class 1A.
How is Class 1A NI calculated on a company car?
The Class 1A NI on a company car is calculated as: list price of the car multiplied by the appropriate percentage (BIK%) based on CO2 emissions, then multiplied by 13.8%. For 2026/27, a car with list price £35,000 and CO2 emissions of 120g/km has a BIK percentage of 29%. The taxable benefit in kind value is £35,000 x 29% = £10,150. Employer Class 1A NI is £10,150 x 13.8% = £1,401 per year. The employer pays this on top of any other employment costs.
When is the P11D and P11D(b) filing deadline?
Employers must submit P11D forms for each employee who received taxable benefits in kind by 6 July following the end of the tax year. For benefits provided in 2026/27 (ending 5 April 2027), the deadline is 6 July 2027. The P11D(b) form, which declares the total Class 1A NI liability for the year, must also be submitted by 6 July 2027. Payment of the Class 1A NI itself is due by 22 July 2027 (for electronic payment) or 19 July 2027 if paying by cheque.
What is a PAYE Settlement Agreement and how does it differ from P11D?
A PAYE Settlement Agreement (PSA) is an arrangement where the employer pays both the income tax and Class 1B NI (also 13.8%) on certain minor, irregular or impractical-to-apportion benefits on behalf of employees. Unlike P11D, the employee has no tax code adjustment and is unaware of the liability. PSAs are commonly used for staff entertainment, gifts, and irregular one-off items. Class 1B NI under a PSA replaces Class 1A. PSA applications must be agreed with HMRC before the end of the tax year.
Are there any employer NI exemptions on benefits in kind?
Yes. Several categories are fully exempt from both income tax and Class 1A NI: employer pension contributions (any amount), trivial benefits costing £50 or less per employee per occasion (up to £300 per year for directors), one mobile phone per employee, subsidised workplace canteen available to all employees, childcare vouchers under the legacy scheme, cycle to work scheme equipment and loans, and reimbursement of genuine business mileage at or below HMRC approved rates.
How much Class 1A NI would a company pay on private medical insurance?
If a company provides private medical or dental insurance for an employee as a benefit in kind, the premium cost is the P11D value. For a senior manager with a medical insurance premium of £1,800 per year, the employer pays Class 1A NI of £1,800 x 13.8% = £248.40 per year on top of the premium cost. For family cover at £3,600 per year, the Class 1A NI cost would be £3,600 x 13.8% = £496.80. The employee also pays income tax on the P11D value through their tax code.
What is the fuel benefit charge for 2026/27?
The car fuel benefit for 2026/27 is calculated using a flat benefit figure of £27,800 multiplied by the same CO2-based percentage used for the company car. For a car with a 29% BIK percentage: £27,800 x 29% = £8,062 P11D value. The employee pays income tax on £8,062 and the employer pays Class 1A NI of £8,062 x 13.8% = £1,113. The fuel benefit charge is exceptionally expensive relative to the value it provides at lower mileage levels -- many employers have removed it.
Can employers claim a deduction for Class 1A NI?
Yes. Class 1A NI is a deductible expense for corporation tax purposes, just like employer Class 1 NI on cash salaries. The timing of the deduction follows the accounting period in which the NI charge arises. Employers should ensure that the cost of benefits in kind, the associated Class 1A NI, and any income tax grossed up under a PSA are all properly recorded in the company accounts as employment costs.
What penalties apply for late P11D filing or late Class 1A payment?
HMRC charges penalties for late P11D submission: £100 per 50 employees per month (or part month) that the forms are late. Interest is charged on late Class 1A NI payment from 23 July (the day after the electronic payment deadline). HMRC may also apply a further penalty of 5% of the unpaid amount if Class 1A NI remains outstanding 30 days after the due date. Filing P11D forms and paying on time is important, particularly for employers with large benefit-in-kind programmes.
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