- Class 1A NI on expenses and benefits is 15% for 2026/27, and it is paid by the employer only1.
- Employment Allowance reduces employer Class 1 NI only, so it never covers Class 1A9.
- P11D and P11D(b) are due by 6 July after the tax year, and the Class 1A is due by 22 July (19 July by cheque)7.
- From April 2027, company cars, car fuel, vans, van fuel and medical benefits must be payrolled; most other benefits follow from April 20288.
What common benefits cost the employer
The cost of a benefit is the money you spend on it plus any National Insurance it triggers. A taxable benefit triggers 15% Class 1A on its value. Paying the same money as salary instead triggers 15% Class 1 employer NI, and employee NI as well.
| Benefit | Cost of the benefit | Employer NI | Total employer cost |
|---|---|---|---|
| Private medical insurance (employer's contract) | £1,200 | £180 Class 1A110 | £1,380 |
| Same £1,200 paid as a cash bonus | £1,200 | £180 Class 1 | £1,380 |
| Gift worth £40 (not cash, not a reward) | £40 | £0 (trivial benefit)2 | £40 |
| Annual party at £120 a head, open to all | £120 a head | £03 | £120 a head |
| One mobile phone on the employer's contract | Contract cost | £04 | Contract cost |
| One health screening a year | Screening cost | £05 | Screening cost |
| Employer pension contribution of £1,750 | £1,750 | £06 | £1,750 |
The bonus row is the comparison: a benefit and the same amount of salary carry the same 15% employer charge, but only the salary also costs the employee NI.
Which benefits are tax- and NI-free?
- Trivial benefits: £50 or less, not cash or a cash voucher, not a reward for work and not in the contract. Directors of close companies are limited to £300 a tax year2.
- Annual functions such as a Christmas party or summer barbecue, if open to all employees and costing £150 or less a head3. The £150 is a limit, not an allowance: go over it and the whole cost is taxable.
- One mobile phone or SIM per employee where the contract is between you and the supplier4.
- One periodic health check or screening a year, flu jabs, and up to £500 of recommended treatment to help an employee return to work5.
- Employer contributions to a registered pension scheme are not taxed and are not earnings for Class 1 NI611.
- Mileage paid at or below the approved rate: 55p a mile for cars and vans for the first 10,000 business miles from 6 April 2026 (up from 45p), 25p after that13.
Most of these exemptions are lost if the benefit is provided through salary sacrifice. Only pension contributions, bicycles and cycling safety equipment, and childcare arrangements that started on or before 4 October 2018 keep their advantages when sacrificed11.
Worked example: salary sacrifice into a pension
An employee on £40,000 gives up £2,000 of salary and the employer pays it into their pension instead. Employer contributions to a registered scheme carry no NI6, so both sides stop paying NI on that £2,000.
| Who | NI rate on the £2,000 | Saving a year |
|---|---|---|
| Employer | 15% | £300.00 |
| Employee | 8% | £160.00 |
| Total | £460.00 |
Employee NI is 8% between £12,570 and £50,270, so the whole £2,000 is in that band at this salary1.
A sacrifice must not take cash pay below the National Minimum Wage11. From 6 April 2029, pension salary sacrifice above £2,000 a year will attract employer and employee NI, though income tax relief continues12. On the figures above the employee is exactly at that limit.
Worked example: the full cost of a £35,000 employee with health cover
| Item | Per year |
|---|---|
| Salary | £35,000.00 |
| Employer NI (15% above £5,000) | £4,500.00 |
| Minimum employer pension (3% of £6,240 to £50,270) | £862.80 |
| Private medical insurance | £1,000.00 |
| Class 1A NI on the insurance (15%) | £150.00 |
| Total employer cost | £41,512.80 |
Before Employment Allowance, which can reduce the employer NI line but not the Class 1A line.
How to report benefits and pay Class 1A
At the end of the tax year, report each employee's taxable benefits on a P11D and your total Class 1A on a P11D(b) by 6 July, and give each employee a copy of their information by the same date. Pay the Class 1A by 22 July, or 19 July by cheque7. A late P11D(b) costs £100 per 50 employees for each month or part month7.
You can instead payroll benefits: the taxable value goes through payroll each pay period, so there is no P11D for those benefits, but you still file a P11D(b) for the Class 1A7. From April 2027 payrolling becomes compulsory for company cars, car fuel, vans, van fuel and employer-provided medical benefits, and from April 2028 for most remaining benefits; loans and accommodation will be confirmed later8. Check your payroll software can do it before then.
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