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HMRC internal manual

National Insurance Manual

Class 4 NICs: Structure: Annual Class 4 NICs maximum pre 6 April 2003: Contributors who are self-employed only: Example: Profits do not exceed the Upper Profits Limit

NIM24105 provides guidance on the calculation method used to determine the maximumamount of Class 2 and 4 NICs payable for all tax years up to and including 2002/2003 by acontributor who is self-employed only.

The following example illustrates the calculation for a contributor whose profits for thetax year do not exceed the Upper Profits Limit.

The calculation method shown applies only to tax years up to and including the 2002/2003tax year. For guidance on the Class 2 and 4 NICs maximum liability for these contributorsfor tax years from 2003/2004 see NIM24150.

The example uses the rates and limits in force during the 2002/2003 tax year.

Mr Nelson has been self-employed for the whole of the 2002/2003 tax year. His profits forthe year amount to £23,000. Mr Nelson held no other employments during the year.

Step 1

Multiply by the appropriate Class 4 percentage, the amount of profits between the LowerProfits Limit (LPL) and the contributor’s actual profits for the year.

£23,000 (actual profits) - £4615 (LPL) = £18385 x 7% (Class 4 percentage rate) =£1286.95

Step 2

Multiply the relevant Class 2 rate by the number of weeks of self-employement in the taxyear

£2.00 x 52 = £104

Step 3

Add together the results of steps 1 and 2

£1286.95. + £104.00 = £1390.95

Mr Nelson is liable to pay a total of £1390.95 in Class 2 and 4 NICs for the 2002/2003tax year.