Guide
Class 1A National Insurance from April 2027: the double payment year
Updated
The cash flow consequence of mandatory payrolling gets far less attention than the software. In 2027 to 2028 many employers pay Class 1A twice in the same year.
What changes
Today Class 1A National Insurance on benefits is reported on the P11D(b) by 6 July after the tax year and paid by 22 July. From 6 April 2027, for the mandated benefits, Class 1A is calculated and reported in real time on the Full Payment Submission alongside Income Tax, in each pay period. HMRC has confirmed Class 1A will be reported through a separate RTI field and has no interaction with the employee's National Insurance category letter.
The double payment
HMRC's own guidance flags this: employers will be paying Class 1A in July 2027 for benefits provided in the 2026 to 2027 tax year under the P11D system, while also paying Class 1A in real time on benefits provided from April 2027 onwards (gov.uk). It is a timing effect, not an extra charge, but it lands as a real cash outflow in a single quarter. Model it now, and warn whoever signs off the cash forecast.
Edge cases HMRC has already answered
- Employees with no earnings
- Where an employee or director receives a benefit but has no earnings, the employer must still send an FPS showing the benefit and no payment of earnings or tax, and pay the Class 1A due.
- Globally mobile employees
- A section 690 direction, which limits PAYE to the UK-earned proportion of income, does not interact with Class 1A, because Class 1A is charged on taxable benefits. Overseas Workday Relief has no National Insurance equivalent, so liability is unaffected.
- Making good
- Where an employee will make good part of a benefit, payroll the cash equivalent net of what the employee is reasonably expected to make good. HMRC's example: a £1,000 benefit with £400 expected to be made good is payrolled as £600.
Employees will think they are being taxed twice
HMRC will automatically remove payrolled benefits from employees' tax codes ready for 6 April 2027, but underpayments of tax from previous years are deliberately left in the code. So an employee can see real-time tax on this year's car benefit and a coding deduction collecting last year's underpayment at the same time. HMRC says the terminology used in employer communications will need to be very clear. Draft that note before March 2027.
Employees facing hardship from combined in-year tax and prior-year underpayments should be pointed to HMRC to discuss options, according to the guidance.