NICs—rates and payment obligations in relation to employment-related securities and securities options

The following Tax practice note provides comprehensive and up to date legal information covering:

  • NICs—rates and payment obligations in relation to employment-related securities and securities options
  • Class 1 NICs—amount of earnings
  • Acquisition of employment-related securities
  • Specific employment-related securities charges
  • Gains from employment-related securities options
  • Notional payments not made good
  • Rate of primary (employee) Class 1 NICs
  • Rate of secondary (employer) Class 1 NICs
  • Who is liable to pay Class 1 NICs?
  • Offshore employment
  • More...

NICs—rates and payment obligations in relation to employment-related securities and securities options

The stated purpose of National Insurance contributions (NICs) is to fund certain state benefits such as the State Pension, as well as other social security benefits such as Jobseeker's Allowance and Incapacity Benefit. NICs are administered by the National Insurance Contributions Office (NICO) which is part of HMRC.

There are currently seven different classes of NICs. The type paid depends on the individual's employment status, how much they earn and whether there are any gaps in their National Insurance record. The seven classes of NICs are shown in the table below.

TypeDue from/onStatutory reference
Primary Class 1Employed earnersSSCBA 1992, ss 2(1)(a), 6
Secondary Class 1Employers (and other persons paying earnings)SSCBA 1992, ss 6, 7
Class 1AEmployers: benefits in kindSSCBA 1992, ss 7, 10
Class 1BEmployers: PAYE settlement agreementsSSCBA 1992, s 10A
Class 2Self-employed earnersSSCBA 1992, ss 2(1)(b), 11
Class 3Voluntary contributionsSSCBA 1992, ss 13, 13A
Class 3AAdditional pension voluntary contributionsSSCBA 1992, s 14A
Class 4Profits of a trade etcSSCBA 1992, s 15

This practice note provides a basic explanation of how (and by whom) the NICs charges relevant to employment-related securities and securities options (namely primary and secondary Class 1 NICs and Class 1A NICs) must be calculated and accounted for.

For full details of when Class 1 and 1A NICs arise, see: NICs implications of

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