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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 4 NICs: Structure: Annual Class 4 NICs maximum pre 6 April 2003: Contributors who are self-employed only: General

Guidance on the Class 4 NICs maximum for all tax years from 2003/2004 is provided at NIM24150 onwards.

The following guidance relates solely to tax years from 1975/1976 to 2002/2003.

For contributors who are self-employed only there is no prescribed annual maximum of Class4 NICs liability.

Instead, for tax years up to and including the 2002/2003 tax year, a contributor’sliability for Class 4 NICs where no other employment is held is determined only by theextent of his profits between the Lower Profits Limit (LPL) and the Upper Profits Limit(UPL).

Depending upon the number of weeks of self-employment during the tax year, the appropriateamount of Class 2 NICs will also be due.

Profits exceed the Lower Profits Limit (LPL) but not the Upper Profits Limit (UPL)

The maximum amount of Class 2 and Class 4 NICs payable by those contributors who areself- employed only for the whole tax year and whose profits do not exceeded the annualUPL is calculated by:

  • deducting the LPL from the actual profits and multiplying that figure by the relevant Class 4 NICs percentage
  • adding to that Class 4 figure 52, or where the tax year comprises 53 contribution weeks 53, Class 2 NICs at the appropriate Class 2 NICs rate.

Profits exceed the Upper Profits Limit (UPL)

The maximum amount of Class 2 and Class 4 NICs payable by those contributors who areself- employed only for the whole tax year and whose profits exceeded the annual UPL iscalculated by:

  • multiplying the profits between the LPL and UPL by the relevant Class 4 NICs percentage
  • adding to that Class 4 figure 52, or where the tax year comprises 53 contribution weeks 53, Class 2 NICs at the appropriate Class 2 NICs rate.

For tax years up to 2002/2003, no Class 4 NICs are payable on profits above the UPL.

Self-employed for part of the tax year

The maximum amount of Class 2 payable by a contributor who is self-employed for onlypart of the year is adjusted to reflect the actual number of weeks of self-employment. Nocorresponding adjustment is made to the amount of Class 4 NICs due. This is because Class4 NICs are an annual liability on profits.