NIM33660 - Liability to Class 1 NICs
Source: gov.uk (2025-10-29)


Sections 1 – 3 and 6 of the Social Security Contributions and Benefits Act 1992

Regulation 145 of the Social Security Contributions Regulations 2001

Liability to Class 1 NICs arises on earnings when they are earned and the liability to pay Class 1 NICs arises at the time those earnings are paid. This can result in territorial considerations for Internationally Mobile Employees (IME).

The Social Security Contributions and Benefits Act 1992 (SSCBA 1992) and the Social Security Contributions Regulations 2001 (SSCR 2001) set out the conditions which should be considered to determine whether a liability for Class 1 NICs arises:

Employed Earner Residence and Presence and Liability for NICs
- Section 1 of SSCBA 1992 outlines the contributory system. Section 1(6) sets a territorial limit that only an employed earner resident or present in the UK will be liable to pay NICs.
- For primary Class 1 contributions the employed earner must be resident, present or ordinarily resident in the UK at the time of the employment.
- For secondary Class 1 contributions the secondary contributor is resident or present in the UK at the time such contributions become payable.
Gainfully Employed and Earnings
- Section 2 of SSCBA 1992 defines ‘employed earner’ as a person who is gainfully employed in the UK or an office holder (including an elective office) with earnings.
- Section 3 of SSCBA 1992 defines ‘earnings’ as any remuneration or profit derived from an employment, for more information, see NIM02010 (https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim02010).
Liability to Pay NICs
- Section 6 of SSBCA 1992 sets out that liability to pay Class 1 NICs arises at the time earnings are paid.
The key points to consider when determining if liability to pay Class 1 NICs arises:
- does the individual meet the residence or presence conditions in section 1(6) of SSCBA 1992 and regulation 145 of SSCR 2001 i.e. in the UK at the time of the employment.
- is the employed earner gainfully employed in the UK or an office holder and are the earnings received remuneration or profits derived from that employment. An “employment” from which such earnings have been received qualifies as “employed earner’s employment” in accordance with sections 2, 3 and 6 of SSCBA 1992.
- where the above is satisfied, consider whether the conditions are met for the period of the employment, rather than the date the earnings are paid. This is because section 6 of SSCBA 1992 refers to the employment from which the earnings are derived, rather than relating to a particular time period. See NIM02015 (https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim02015) for further details.
Therefore, where an employee is subject to UK legislation as an employed earner and is:
- in the UK, or
- treated as if they are in the UK
at the time the work is carried out, then Class 1 NICs liability arises at the time the earnings are earned and the Class 1 NICs liability is assessed and payable when the earnings are actually paid. This applies even if the employee is no longer subject to UK legislation when those earnings are actually paid.

Example

Ben lives and works in the UK and is liable for UK Class 1 NICs. Ben earns a £30,000 bonus payment for his UK work and Ben’s employer pays it in instalments. The first £10,000 is paid while Ben is subject to UK legislation and Class 1 NICs are paid on this amount. The remaining £20,000 will be paid after Ben has moved abroad and is no longer subject to UK social security legislation.

Ben is liable for UK Class 1 NICs on the full amount of £30,000 because Ben was an employed earner resident, present or ordinarily resident in the UK at the time of the employment from which this bonus has been earnt. Ben is liable to pay Class 1 NICs on the additional £20,000 bonus payment once it’s paid, irrespective of the fact that Ben has left the UK and is no longer subject to UK social security legislation.