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HMRC internal manual

National Insurance Manual

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

NIM24102 explains that there is no annual maximum of Class 2 and 4 NICs prescribedin legislation for a person who is self-employed only. The amount payable depends solelyupon the level of profits and number of weeks of self employment.

The following method is used to calculate the amount of Class 2 and 4 NICs payable bysomeone who is self-employed but who has no other employments.

Step 1

Multiply, by the appropriate Class 4 NICs percentage, the amount of profits between:

  • the Lower Profits Limit (LPL) and the Upper Profits Limit (UPL) - where the contributor’s profits exceed the UPL or
  • the LPL and the contributor’s actual profits for the year - where the contributor’s profits do not exceed the UPL.

Step 2

Multiply the relevant Class 2 NICs rate by the number of weeks of self-employment in thetax year.

Step 3

Add together the results of steps 1 and 2.

The result of step 3 is the amount of Class 2 and Class 4 NICs payable for the tax year.

Examples of the calculation can be found at NIM24110.