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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: example: profits do not exceed the Upper Profits Limit

Regulation 100 (SSCR 2001)

NIM24152 provides guidance on the calculation method used to determine the maximum amount of Class 2 and 4 NICs payable by a contributor who is self-employed only.

The following example illustrates the calculation for a contributor whose profits or gains for the tax year do not exceed the Upper Profits Limit (UPL).

The calculation method shown applies to tax years from 2003/2004. 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 Ennis has been self-employed for the whole of the 2012/2013 tax year. His profits for the year amount to £33,000. Mr Ennis held no other employments during the year.

Step 1

Multiply by the appropriate Class 4 percentage rate, the amount of profits or gains between the Lower Profits Limit (LPL) and the earners actual profits or gains for the year

£33,000 (actual profits) - £7,605 (LPL) = £25,395 x 9% (main Class 4 percentage) = £2,285.55

Step 2

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

£2.65 x 52 = £137.80

Step 3

Add together the results of steps 1 and 2

£22,85.55. + £137.80 = £2,423.35

Mr Ennis is liable to pay a total of £2,423.35 in Class 2 and 4 NICs for the 2012/2013 tax year.