Class 4 NICs: structure: annual Class 4 NICs maximum from 6 April 2003: contributors who are employed and selfemployed: general
Regulation 100 SS(C)R 2001
NIM24151 explains why, despite the introduction of an uncapped Class 4 NICs liability on all profits in excess of the Upper Profits Limit (UPL) an annual Class 4 NICs maximum is required.
Regulation 100, which sets out the annual Class 4 NICs maximum, applies only to contributors who are liable to pay both Class 1 and Class 4 NICs. This means that to apply regulation100 a contributor must be selfemployed with profits exceeding the Lower Profits Limit (LPL) and be an employed earner with earnings, in at least one employment, which exceed the Primary Threshold. Unlike the pre 2003/2004 position, the contributor’s Class 1 and Class 2 NICs must first be compared to the Class 1 and Class 2 NICs annual maximum, with any excess Class 1 and 2 NICs dealt with before the Class 4 NICs maximum is applied.
The new Class 4 NICs annual maximum retains the same principle as the pre 2003/2004 maximum, by taking into account any Class 1 or 2 NICs that the person has paid. Although it takes these contributions into account the new calculation ensures that at least the additional Class 4 NICs percentage in Class 4 NICs is payable on all profits above the LPL. The calculation achieves this by retaining use of Class 2 and 4 maximum. The amount of Class 1 and 2 NICs paid is compared to the Class 2 and 4 NICs maximum. However, instead of providing that the difference between these two figures is the amount of Class 4 NICs due, as was the pre 2003/2004 position, the new Class 4 maximum provides that that figure is the amount of Class 4 due at the main Class 4 percentage rate. This then allows the maximum calculation to provide for any additional Class 4 that may be due on the earners total profits.
In essence, the new Class 4 NICs annual maximum:
 first sets out a Class 2 and main rate Class 4 NICs maximum. It does this by calculating the maximum amount of Class 4 NICs payable on profits between the UPL and the LPL and adds to that figure 53 Class 2 NICs at the rate in force for the year in question
 it then deducts from that combined figure any Class 1 NICs that have been paid at the main Class 1 percentage and any Class 2 NICs paid
 the difference, providing it is a positive figure, is the maximum amount of Class 4 NICs that the contributor is liable to pay at the main Class 4 NICs percentage
 it then calculates the amount of profits that would be needed to pay that amount of Class 4 NICs and it deducts that figure from the contributor’s total profits
 if that figure is a positive figure it represents the amount of profits on which Class 4 NICs at 1% are payable
To produce the above result regulation 100 provides a step by step calculation. The calculation allows every Class 4 NICs contributor who is subject to a Class 4 NICs annual maximum to fall into one of three categories:

those who are due to pay:
 Class 4 NICs at a rate of the main Class 4 NICs percentage only

those who are due to pay:
 a mixture of Class 4 NICs at rate of the main Class 4 NICs percentage and of the additional Class 4 NICs percentage and

those who are due to pay:
 Class 4 NICs at a rate of the additional Class 4 NICs percentage only
The amount of a contributor’s profits and the amount of Class 1 and 2 NICs that have been paid will determine into which of the three categories the contributor falls. Regulation 100 deals with these three categories by labelling them Case 1, Case 2 and Case 3.
 NIM24175 explains the general calculation method adopted by regulation 100.
 NIM24176, explains the calculation method for case 1
 NIM24177, explains the calculation method for case 2
 NIM24178, explains the calculation method for case 3 and
 NIM24180 onwards provides examples for each of the three cases.
 NIM24050 provides a list of rates for Class 4 from the 20032004 tax year