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.
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
Multiply the relevant Class 2 NICs rate by the number of weeks of self-employement in thetax year
£2.00 x 52 = £104
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.