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HMRC internal manual

# Class 4 NICs: structure: annual Class 4 NICs maximum from 6 April 2003: contributors who are employed and self-employed: calculation method

## Regulation 100, SS(C)R 2001

To determine the maximum amount of Class 4 NICs payable for a year by a contributor, who has paid Class 1, or Class 1 and Class 2 NICs in the same year, the following calculation are used.

From 6 April 2003 to 5 April 2011.

Step 1

Subtract the Lower Profits Limit from the Upper Profits Limit for that year

Step 2

Multiply the result of step 1 by 8%

Step 3

Add to the result of step 2, 53 Class 2 NICs at the rate in force for the year

Step 4

Subtract from the result of step 3 the total amount of any Class 2 NICs and any Class 1 NICs at the main primary percentage that the contributor has paid.

The next steps are determined by reference to the following three cases.

Case 1

If the result of step 4 is a positive value and exceeds the aggregate of:

1. primary Class 1 NICs payable at the main percentage
2. Class 2 NICs and
3. Class 4 NICs payable at the main Class 4 NICs percentage

that the contributor would have paid if no maximum existed, the result of this step is the maximum amount of Class 4 NICs that the contributor is liable to pay. There is no need to proceed to any further steps.

Case 2

If the result of step 4 is a positive value but does not exceed the aggregate of:

1. primary Class 1 NICs payable at the main percentage
2. Class 2 NICs and
3. Class 4 NICs payable at the main Class 4 percentage

that the contributor would have paid if no maximum existed, the result of this step is the maximum amount of Class 4 NICs that the contributor is liable to pay at 8%. The calculation then continues at step 5.

Case 3

If the result of this step is a negative value, the maximum amount of Class 4 NICs payable at the main Class 4 NICs percentage is nil and the result of this step is treated as nil. The calculation then continues at step 5.

Step 5

Multiply the result of step 4 by 100/8

Step 6

Subtract the Lower Profits Limit from the lesser of the Upper Profits Limit and the contributor’s actual amount of profits for the year

Step 7

Subtract the result of step 5 from the result of step 6. If the result of this is a negative value it is treated as nil

Step 8

Multiply the result of step 7 by 1%

Step 9

Multiply the amount by which the profits and gains for the year exceed the Upper Profits Limit by 1%.

Where Case 1 applies, the maximum amount of Class 4 NICs payable is the figure shown at step 4

Where Case 2 or Case 3 applies, the maximum amount of Class 4 NICs payable is the aggregate of steps 4, 8 and 9.

### From 6 April 2011

Step 1

Subtract the Lower Profits Limit from the Upper Profits Limit for that year

Step 2

Multiply the result of step 1 by 9%

Step 3

Add to the result of step 2, 53 Class 2 NICs at the rate in force for the year

Step 4

Subtract from the result of step 3 the total amount of any Class 2 NICs and any Class 1 NICs at the main primary percentage that the contributor has paid.

The next steps are determined by reference to the following three cases.

Case 1

If the result of step 4 is a positive value and exceeds the aggregate of:

1. primary Class 1 NICs payable at the main percentage
2. Class 2 NICs and
3. Class 4 NICs payable at the main Class 4 NICs percentage

that the contributor would have paid if no maximum existed, the result of this step is the maximum amount of Class 4 NICs that the contributor is liable to pay. There is no need to proceed to any further steps.

Case 2

If the result of step 4 is a positive value but does not exceed the aggregate of:

1. primary Class 1 NICs payable at the main percentage
2. Class 2 NICs and
3. Class 4 NICs payable at the main Class 4 percentage

that the contributor would have paid if no maximum existed, the result of this step is the maximum amount of Class 4 NICs that the contributor is liable to pay at 9%. The calculation then continues at step 5.

Case 3

If the result of this step is a negative value, the maximum amount of Class 4 NICs payable at the main Class 4 NICs percentage is nil and the result of this step is treated as nil. The calculation then continues at step 5.

Step 5

Multiply the result of step 4 by 100/9

Step 6

Subtract the Lower Profits Limit from the lesser of the Upper Profits Limit and the contributor’s actual amount of profits for the year

Step 7

Subtract the result of step 5 from the result of step 6. If the result of this is a negative value it is treated as nil

Step 8

Multiply the result of step 7 by 2%

Step 9

Multiply the amount by which the profits and gains for the year exceed the Upper Profits Limit by 2%.

Where Case 1 applies, the maximum amount of Class 4 NICs payable is the figure shown at step 4

Where Case 2 or Case 3 applies, the maximum amount of Class 4 NICs payable is the aggregate of steps 4, 8 and 9.