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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: self-employed for part of the tax year only

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) and who was self-employed for only part of the 2003/2004 tax year.

The calculation method shown applies only to tax years from 2003/2004. For guidance on the Class 2 and 4 NICs annual maximum for tax years up to 2002/2003, see NIM24100.

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

Mrs Grainger has been self-employed for 48 weeks during the 2012/2013 tax year. Her profits for the year amount to £35,000. Mrs Grainger held no other employments during the year. Prior to commencing her self-employment Mrs Grainger was unemployed.

Step 1

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

£35,000 (actual profits) - £7605 (LPL) = 27395 x 9% (main Class 4 NICs percentage) = £2465.56

Step 2

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

£2.65 x 48 = £127.20

Step 3

Add together the results of steps 1 and 2

£2465.56 + £127.20 = £2592.76

Mrs Grainger is liable to pay a total of £2592.76 in Class 2 and 4 NICs for the 2012/2013 tax year.

NB: Although Mrs Grainger was only self-employed for 48 weeks during the 2012/2013 tax year and his Class 2 liability is adjusted, she is still required to pay Class 4 NICs on all of her profits in excess of the LPL.