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HMRC internal manual

National Insurance Manual

Class 4 NICs: Structure: Annual Class 4 NICs maximum from 6 April 2003: Contributors who are self- employed only: General

Guidance on the Class 4 NICs annual maximum for all tax years prior to 2003/2004 isprovided at NIM24101 onwards. The following guidance relatessolely to tax years from 2003/2004.

For contributors who are self-employed only there is no prescribed annual maximum of Class4 NICs liability.

Instead, for all tax years from 2003/2004 onwards, a contributor’s maximum liabilityfor Class 4 NICs where no other employment is held is determined by the extent of theprofits above the Lower Profits Limit (LPL).

Depending upon the number of weeks of self-employment during the tax year thesecontributors will also be liable for the appropriate amount of Class 2 NICs.

The maximum amount of Class 2 and Class 4 NICs payable by those contributors who are selfemployed only and whose profits exceeded the Lower Profits Limit is calculated by:

  • multiplying the profits between the Lower Profits Limit and Upper Profits Limit by the main Class 4 NICs percentage
  • multiplying the profits above the Upper Profits Limit by the additional Class 4 NICs percentage
  • adding to the Class 4 NICs figure so calculated 52 or (where the tax year comprises 53 contribution weeks) 53 Class 2 NICs at the appropriate Class 2 NICs rate.

Self-employed for part of the tax year

The maximum amount of Class 2 NICs payable by a contributor who is self-employed foronly part of the year is adjusted to reflect the actual number of weeks ofself-employment. No corresponding adjustment is made to the amount of Class 4 NICs due.

The calculation method is explained in more detail at NIM24153 andexamples of the calculation are provided at NIM24160 onwards.