Income Tax (Earnings and Pensions) Act 2003 section 428A

Relief for secondary Class 1 contributions met by employee

Section 428A provides income tax relief where an employee bears the cost of the employer's secondary Class 1 National Insurance contributions arising on a chargeable event relating to conditional interests in shares under section 426.

• Where a NIC agreement or NIC election is in place, an employee who pays or assumes liability for the employer's secondary Class 1 NICs on share-related employment income can claim income tax relief equal to the amount paid or transferred
• Under a NIC agreement, the employer's NICs must be recovered from the employee before 5 June following the tax year in which the chargeable event occurs; under a NIC election, relief covers the full liability transferred unless approval of the election is withdrawn, in which case relief is capped at the amount actually met before that same 5 June deadline
• The relief operates as a deduction from the amount that would otherwise count as employment income for income tax purposes, thereby reducing the employee's income tax bill
• The relief does not reduce the amount treated as earnings for National Insurance purposes under the Social Security Contributions and Benefits Act 1992, so NICs remain calculated on the full, unreduced employment income figure