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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 4 NICs: Structure: Annual Class 4 NICs maximum pre 6 April 2003: Contributors who are employed and self-employed: Examples: Profits exceed the Upper Profits Limit but maximum Class 1 NICs paid

NIM24125 provides guidance on the calculation method used to determine the Class 1,2 and 4 NICs annual maximum liability for a contributor who is both employed andself-employed during the same tax year.

The following example illustrates the calculation for a contributor whose profits for thetax year exceed the Upper Profits Limit and who has also paid the maximum amount of Class1 and 2 NICs payable.

The calculation method shown applies only to tax years up to and including the 2002/2003tax year. For guidance on the Class 1, 2 and 4 NICs annual maximum for tax years from2003/2004 see NIM24150 et seq.

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

Mr Parker has been self-employed for the whole of the 2002/2003 tax year. His profits fromself- employment for the year amount to £60,000. Mr Parker was also employed during the2002/2003 tax year and has paid the maximum amount of Class 1 NICs due. The total amountof Class 1 and 2 NICs paid by Mr Parker is £2628.80

Step 1

Calculate the Class 2 and 4 maximum for the tax year.

Class 4 = £30420 (UPL) - £4615 (LPL) x 7% = £1806.35
   
Class 2 = £2.00 x 53 = £106.00
Class 2 + 4 maximum = £1912.35

Step 2

Deduct from step 1 the amount of Class 1 and 2 NICs paid

£1912.35 - £2628.80 = minus £716.45

Step 3

If the result of step 2 is a negative figure, no Class 4 NICs are due

If the result of step 2 is a positive figure, that is the maximum amount of Class 4 NICsdue

As the figure at step 2 is a negative figure, Mr Parker is not liable to pay any Class 4NICs.