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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 4 NICs: structure from 6 April 2003: changes from 6 April 2003

Section 15, SSCBA 1992

NIM24032 explains the background to the Class 4 NICs changes introduced from 6 April 2003.

Section 15 of SSCBA 92, which provides for the payment of Class 4 NICs, was amended by section 3 of the National Insurance Contributions Act 2002. The amendment provided for a new Class 4 NICs liability on all profits or gains which:

  • are derived from self-employment
  • are profits or gains chargeable to income tax under Chapter 2 of Part 2 of the Income Tax (Trading and Other Income) Act 2005, (formerly Case I and II of Schedule D of the Income and Corporation Taxes Act 1988)
  • exceed the Upper Profits Limit (UPL).

The amendments to section 15 provide that where Class 4 NICs are payable, the amount due is now the aggregate of:

  • the main Class 4 NICs percentage on so much of the earner’s profits or gains as:

    • exceeds the Lower Profits Limit (LPL) but
    • do not exceed the UPL and
  • the additional Class 4 NICs percentage of so much of the profits or gains as exceeds the UPL.

Section 15 also provides for a tax year beginning 6 April 2003:

  • the main Class 4 NICs percentage is 8% and
  • the additional Class 4 NICs percentage is 1%.

The main Class 4 NICs percentage, currently 9%, is subject to review by the Treasury and alteration under section 143 of the Social Security Administration Act 1992 but the additional Class 4 NICs percentage, currently 2%, cannot be altered without primary legislation.

Section 15 provides the current LPL and UPL figures. These figures are subject to annual review by the Treasury and can be altered under section 141 of the Social Security Administration Act 1992.

Similar changes were made to the Social Security Contributions and Benefits (Northern Ireland) Act 1992.