NIM24111 - 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
Regulation 100 Social Security (Contributions) Regulations 2001 (SI 2001 No. 1004)
NIM24105 provides guidance on the calculation method used to determine the Class 2 and 4 NICs maximum liability for a contributor who is self-employed only for all tax years up to and including the 2002/2003 tax year. For guidance on the Class 2 and 4 NICs maximum liability for these contributors for all tax years from 2003/2004 see NIM24150 onwards.
The following example illustrates the calculation used for a contributor whose profits for the tax year exceed the Upper Profits Limit. The example uses the rates and limits in force during the 2002/2003 tax year.
Mr H McCoy has been self-employed for the whole of the 2002/2003 tax year. His profits for the year amount to £60,000. Mr H McCoy held no other employments during the year.
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).
£30,420 (UPL) - £4615 (LPL) = £25,805 x 7% (Class 4 main percentage rate) = £1,806.35
Step 2
Multiply the relevant Class 2 NICs rate by the number of weeks of self-employement in the tax year
£2.00 x 52 = £104
Step 3
Add together the results of steps 1 and 2
£1,806.35 + £104.00 = £1,910.35
Mr H McCoy is liable to pay a total of £1,910.35 in Class 2 and 4 NICs for the 2002/2003 tax year. He pays no Class 4 NICs on profits above the UPL.