Introduction
5. The Class 1 NICs rates and thresholds are set out in a combination of primary and secondary legislation. Class 1 contributions are paid by employers and employees on earnings. Employees pay primary Class 1 contributions on earnings between the Primary Threshold and the UEL at the main primary percentage rate of 12% and at the additional primary percentage rate which is 2% on earnings over the UEL. Section 8(2)(a) and (b) of the Social Security Contributions and Benefits Act 1992 ("SSCBA") and the Social Security and Contributions and Benefits (Northern Ireland) Act 1992 ("SSCB(NI)A") sets out these percentage rates. Employers pay secondary Class 1 contributions on earnings over the Secondary Threshold at the secondary percentage rate of 13.8%, this is set out in section 9(2) of the SSCBA and SSCB(NI)A. Regulation 10 of the Social Security (Contributions) Regulations 2001 (SI 2001/1004) specifies the Primary Threshold, the UEL and the Secondary Threshold that applies for the tax year.
6. Class 1A contributions are payable annually, by employers and third parties, on most taxable benefits in kind. Class 1A contributions are payable at a rate of 13.8% under section 10 of the SSCBA and SSCB(NI)A.
7. Class 1B contributions are payable annually, by employers on items which are dealt with under a PAYE Settlement Agreement ("PSA") for income tax. Class 1B contributions are payable at a rate of 13.8% on the value of items included in the PSA and on the total tax payable by the employer under the PSA under section 10A of the SSCBA and SSCB(NI)A.
8. Class 1A and 1B contributions are linked to the secondary percentage by virtue of section 10(5) and 10A(6) of the SSCBA and SSCB(NI)A.