# Class 4 NICs: structure: annual Class 4 NICs maximum from 6 April 2003 to 5 April 2011: contributors who are employed and self-employed: examples: Case 2 of regulation 100(3): profits exceed the UPL

NIM24170 onwards provides guidance on the calculation method used to determine the Class 1, 2 and 4 NICs annual maximum liability for a contributor who is both employed and self-employed during the same tax year. The calculation method shown applies to tax years from 2003/2004 onwards. For guidance on the Class 1, 2 and 4 NICs annual maximum for tax years before 2003/2004 see NIM24120 onwards.

The following example illustrates the Class 1, 2 and 4 NICs annual maximum calculation for a contributor who falls into Case 2 of regulation 100(3). In this example the contributor’s profits exceed the Upper Profits Limit (UPL) and he is required to pay some Class 4 NICs at the additional Class 4 percentage. However, since the amount of Class 1 and 2 NICs that the contributor has paid does not exceed the Class 2 and main percentage Class 4 NICs maximum, this contributor is also required to pay some Class 4 NICs at 8% and some at a rate of 1% on his profits below the UPL. This example should be read in conjunction with NIM24175 and NIM24177

The example uses the rates and limits in force during the 2010/2011 tax year.

### Example

Mr Clancy has been self-employed for the whole of the 2010/2011 tax year. His profits for the year are £70,000. He has paid £3314.05 in Class 4 NICs, of which £3052.80 has been paid at the main Class 4 percentage. He has paid 52 Class 2 NICs at £2.40. Mr Clancy was also employed during the 2010/2011 tax year and has paid £2500 at the main Class 1 percentage. Mr Clancy’s maximum Class 1, 2 and 4 NICs liability is calculated as follows.

Step 1

Subtract the Lower Profits Limit (LPL) from the UPL

£43875 - £5715 = £38160

Step 2

Multiply the result of step 1 by 8%

£38160 x 8% = £3052.80

Step 3

Add to the result of step 2, 53 times the weekly rate of Class 2 NICs

£3052.80 + (53 x £2.40) = £3180

Step 4

Subtract from the result of step 3 the aggregate amount of any Class 2 NICs and any primary Class 1 NICs paid at the main primary percentage rate.

£3180 - £2624.80 = £555.20

Which Case of regulation 100(3) does Mr Clancy fall into?

If the result of step 4 is a positive figure but it does not exceed the aggregate of Class 1 NICs payable at the main primary percentage, Class 2 NICs and Class 4 NICs payable at the main Class 4 percentage, the result of step 4 is the maximum amount of Class 4 NICs due at 8%.

On his earnings and profits Mr Clancy would be liable, and has paid, a total of £5938.85 in NICs. That is £2500 in Class 1 NICs, plus £124.80 in Class 2 NICs plus £3314.05 in Class 4 NICs. The figure produced by step 4 (£555.20) is a positive figure but it does not exceed the total Class 1, 2 and main percentage Class 4 NICs figure of £5677.60 - that is £2500 in Class 1 NICs, plus £124.80 in Class 2 NICs plus £3052.80 main percentage Class 4 NICs. Mr Clancy therefore falls into Case 2 of regulation 100(3). Case 2 provides that the figure of Class 4 produced at step 4 is the maximum amount of Class 4 NICs payable at 8%. It is then necessary to go to step 5 to 9 of regulation 100(3).

Step 5

Multiply the result of step 4 by 100/8

555.20 x 100/8 = £6940

Step 6

Subtract the Lower Profits Limit from the lesser of the Upper Profits Limit and the actual amount of profits for the year.

£43875 - £5715 = £38160

Step 7

Subtract the result of step 5 from the result of step 6.

£38160 - £6940 = £31220

Step 8

Multiply the result of step 7 by 1%

£31220 x 1% = £312.20

Step 9

Multiply by 1% the amount of profits in excess of the Upper Profits Limit

(£70,000 - £43875) x 1% = £261.25

Step 10

Add together steps 4, 8 and 9

£555.20 + £312.20 + £261.25= £1128.65

Mr Clancy’s annual Class 4 NICs liability amounts to £1128.65. He is due to pay a combination of Class 4 NICs at 8% and 1%. As he has profits above the UPL he liable for Class 4 NICs at the additional percentage. As Mr Clancy has paid a total of Class 4 NICs amounting to £3314.05 he is due a Class 4 NICs refund.