NIM24132 - 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 not paid

Regulation 100 Social Security (Contributions) Regulations 2001 (SI 2001 No. 1004)

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 and self-employed during the same tax year.

The following example illustrates the calculation for a contributor whose profits for the tax year exceed the Upper Profits Limit but who has not paid the maximum amount of Class 1 and 2 NICs payable.

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

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

Mr Coulson has been self-employed for the whole of the 2002/2003 tax year. His profits for the year amount to £60,000. Mr Coulson was also employed during the 2002/2003 tax year and has paid a total amount of Class 1 and 2 NICs amounting to £500.

Step 1

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

Class 4 = £30,420 (UPL) - £4,615 (LPL) x 7%	= £1,806.35
Class 2 = £2.00 x 53	= £106.00
Class 2 + 4 maximum	= £1,912.35

Step 2

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

£1,912.35 - £500 = £1,412.35

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 then that is the maximum amount of Class 4 NICs due

As the figure at step 2 is a positive figure, Mr Coulson is liable to pay £1,412.35 in Class 4 NICs. Mr Coulson is restricted to the Class 2 and 4 NICs annual maximum of £1,912.35, despite having paid £500 in Class 1 NICs.