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HMRC internal manual

# Class 4 NICs: structure: annual Class 4 NICs maximum from 6 April 2003: contributors who are self-employed only: example: profits exceed the Upper Profits Limit

NIM24152 provides guidance on the calculation method used to determine the maximum amount of Class 2 and 4 NICs payable for tax years 2003/2004 onwards by contributors who are self- employed only.

The following example illustrates the calculation for a contributor whose profits or gains for the tax year exceed the Upper Profits Limit (UPL).

The calculation method shown applies to tax years from 2003/2004 onwards. For guidance on the Class 2 and 4 NICs annual maximum for tax years before 2003/2004 see NIM24101 onwards.

The example uses the rates and limits in force during the 2012/2013 tax year. For rates and limits for other years see NIM24050

Mr Copeland has been self employed for the whole of the 2012/2013 tax year. His profits for the year amount to £70,000. Mr Copeland held no other employments during the year.

Step 1

Multiply by the appropriate main Class 4 percentage, the amount of profits or gains between the Lower Profits Limit (LPL) and the UPL

£42475 (UPL) - £7605 (LPL) = £34870 x 9% (main Class 4 percentage) = £3138.30

Step 2

Multiply the amount of profits or gains that exceed the UPL by the additional Class 4 percentage.

£70,000 (actual profits) - £42475 (UPL) = £27525 x 2% (additional Class 4 percentage) = £550.50

Step 3

Multiply the relevant Class 2 NICs rate by the number of weeks of self-employment in the tax year

52 x £2.65 = £137.80

Step 4

Add together the results of steps 1, 2 and 3

£3138.30 + £550.50 + £137.80 = £3826.60

The result of step 4 is the amount of Class 2 and Class 4 NICs payable by a contributor who is self-employed only and has profits or gains amounting to £70,000.

Note: for class 2 purposes some tax years have 53 weeks. In those cases 53 should be used instead of the 52 quoted at step 3 above.