Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
, see all updates

Class 4 NICs: structure: special Class 4 NICs: changes from 6 April 2003

Section 18, SSCBA 1992

Income Tax (Earnings and Pensions) Act 2003 (ITEPA)

NIM24002 explains that some contributors who pay tax under ITEPA but who are treated by Schedule 1, Part II of the Categorisation of Earners Regulations 1978 (see ESM0122) as self employed, pay special Class 4 NICs

NIM24032 provides guidance on the background to the changes introduced by section 3 of the National Insurance contributions Act 2002 from 6 April 2003 to ordinary Class 4 contributions. Specifically, NIM24033 explains that the changes were made by amending section 15 SSCBA 92.

Section 18 of SSCBA 92, which replicates most of section 15 of SSCBA 92, provides for the payment of special Class 4 NICs by regulations.

Section 3 of the National Insurance Contributions Act 2002 also amended section 18 of SSCBA 92 so as to provide that where:

  • an earner derives from an employment which is by regulation treated as self-employment and
  • in any tax year has earnings from such an employment which are liable for Class 2 NICs (but not for higher rate Class 2 NICs, such as that for share fishermen) and
  • those earnings exceed the Lower Profits Limit

Class 4 NICs will be payable.

The amount of that contribution is the aggregate of:

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

    • exceeds the Lower Profits Limit but
    • does not exceed the Upper Profits Limit and
  • the additional Class 4 percentage of so much of the profits or gains as exceeds the Upper Profits Limit.

Section 15 provides for the purposes of the whole of SSCBA (including section 18) for a tax year beginning 6th April:

  • the main Class 4 percentage and
  • the additional Class 4 percentage

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 SSCBA 92 also provides the current Lower and Upper Profits Limits for the tax year in question. These figures are subject to alteration under section 141 of the Social Security Administration Act for the purposes of both section 15 and section 18 of SSCBA 92.