Class 4 NICs: structure from 6 April 2003: background
In his 2002 Budget Statement, the Chancellor announced that, with effect from 6 April 2003, a new Class 4 NICs liability would exist on all profits or gains exceeding the Upper Profits Limit (UPL). The new liability was set at 1%.
In addition, the Chancellor announced a 1% increase in the existing rate of Class 4 NICs on profits or gains between the Lower Profits Limit (LPL) and the UPL.
Although the changes affect the method by which Class 4 NICs are calculated and the amount of Class 4 NICs that are due from 6 April 2003, no changes were made to the underlying principles of Class 4 NICs liability.
Liability for Class 4 NICs continues to arise:
- only in respect of those contributors who are self-employed or who, by virtue of the Categorisation Regulations, are treated as self-employed
- only when the profits or gains from self-employment exceed the LPL
- on profits or gains computed in accordance with Schedule 2 of SSCBA 92
- annually, with payments being paid together with income tax under Self Assessment.
Although the impact of the changes have been kept to a minimum, the introduction of a Class 4 NICs liability on profits and gains above the UPL has had consequential effects on certain Class 4 NICs issues. The main areas affected are:
- the annual Class 4 NICs maxima, see NIM24150
- deferment of Class 4 NICs, see NIM24004
- excess Class 4 refunds, see NIM24170