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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: Example: Profits exceed the Upper Profits Limit

NIM24105 provides guidance on the calculation method used to determine the Class 2and 4 NICs maximum liability for a contributor who is self-employed only for all tax yearsup to and including the 2002/2003 tax year. For guidance on the Class 2 and 4 NICs maximumliability for these contributors for all tax years from 2003/2004 see

NIM24150 et seq.

The following example illustrates the calculation used for a contributor whose profits forthe tax year exceed the Upper Profits Limit. The example uses the rates and limits inforce during the 2002/2003 tax year.

Mr Mason has been self-employed for the whole of the 2002/2003 tax year. His profits forthe year amount to £60,000. Mr Mason held no other employments during the year.

Step 1

Multiply by the appropriate Class 4 NICs percentage, the amount of profits between theLower Profits Limit (LPL) and the Upper Profits Limit (UPL).

£30420 (UPL) - £4615 (LPL) = £25805 x 7% (Class 4 main percentage rate) = £1806.35

Step 2

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

£2.00 x 52 = £104

Step 3

Add together the results of steps 1 and 2

£1806.35 + £104.00 = £1910.35

Mr Mason is liable to pay a total of £1910.35 in Class 2 and 4 NICs for the 2002/2003 taxyear. He pays no Class 4 NICs on profits above the UPL.