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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 4 NICs: structure: annual Class 4 NICs maximum from 6 April 2003: contributors who are employed and self employed: calculation method: Case 2 of regulation 100(3)

Case 2 of regulation 100(3), SS(C)R 2001

NIM24175 sets out the calculation method for determining the maximum amount of Class 4 NICs payable by a contributor who is both employed and self-employed and liable to pay Class 1, 2 and Class 4 NICs. Regulation 100(3) provides three cases and the calculations vary depending upon which case the contributor falls into.

These three cases are necessary because of the need to ensure that all contributors pay at least 1% in Class 4 NICs on all of their profits and gains. Depending upon the level of a contributor’s profits and the amount of Class 1 and 2 NICs paid, the maximum amount of Class 4 NICs due will vary. All contributors who are liable to pay both Class 1 and Class 4 NICs will be required to pay either:

  • Class 4 NICs at the main Class 4 NICs percentage only
  • a mixture of Class 4 NICs at the main Class 4 NICs percentage and the additional Class 4 NICs percentage
  • Class 4 NICs at the additional Class 4 NICs percentage only.

Case 2 of regulation 100(3) applies where the result of step 4 of regulation 100(3) is a positive value but it 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. To determine this it is necessary to work out the amount of Class 1, 2 and 4 NICs that the contributor would pay:

  • on all of his earnings above the primary threshold in each of his employed earner’s employments,
  • on all of his profits above the LPL
  • in Class 2 NICs.

Those contributors who fall into Case 2 of regulation 100(3) will be liable to pay a mixture of Class 4 NICs at the main and the additional percentages. The reason for this is that they will:

  • have paid an amount of Class 1 and/or Class 2 NICs that is less than:

    • the main Class 4 NICs percentage on profits between the UPL and LPL plus
    • 53 Class 2 contributions and
  • have profits which exceed the amount needed to pay the amount of Class 4 NICs at the main Class 4 NICs percentage that step 4 of regulation 100(3) requires.

It is important to note that regulation 100 provides contributors who fall into Case 2 of regulation 100(3) with their exact maximum. This contrasts with contributors who fall into Case 1 of regulation 100(3) - see NIM24176. Where a contributor has paid more Class 4 NICs than regulation 100(3) requires, an excess refund will be due.

  • NIM24182 - provides an example of a contributor who falls into Case 2 of regulation 100(3) but who is not required to pay additional rate Class 4 NICs because the profits do not exceed the UPL.
  • NIM24183 - provides an example of a contributor who falls into Case 2 of regulation 100(3) and who is required to pay additional rate Class 4 NICs because the profits exceed the UPL

In both examples the contributor is, however, required to pay some Class 4 NICs at additional Class 4 NICs percentage because the amount of Class 1 and 2 NICs paid do not exceed:

* the main Class 4 NICs percentage on profits between the UPL and LPL plus
* 53 Class 2 NICs.