What expenses are liable to National Insurance contributions?

Expenses paid to you by your employer which amount to more than the actual cost to you will count as gross earnings for the purposes of calculating National Insurance contributions (NICs).

For example, if you arrange a phone contract, but it is reimbursed by the employer, it counts as earnings, so the employer must add the amount reimbursed to your earnings and deduct and pay Class 1 National Insurance and PAYE tax through the payroll.

If the inclusion of such expenses takes your gross earnings above the Upper Earnings Limit (£866 per week in 2017-18), you will not pay extra NICs, but you are still liable to income tax. Examples include travel and subsistence expenses and mileage allowances.

Reimbursement of actual costs and the payment of mileage allowances within the HM Revenue and Customs authorised limits will be exempt from the figure used to calculate NICs.

Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from your union, a source on our free help page or an independent financial advisor before taking any action.

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