Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
, see all updates

Class 4 NICs: computation of liability: losses: example

Kate is completing her Self-Assessment Return. In the period she has:

Year 1:

Employed earners income, taxed under PAYE and liable to Class 1 NICs £20,000
   
A profit from her profession of author £5,000
A share of a partnership loss from a trade £10,000

Kate elects to set both the Income Tax loss and the Class 4 NICs loss against other income of the year.

She has other income liable to Income Tax in the year of £25,000. She can relieve the whole of her loss, £10,000.

She has other profits liable to Class 4 NICs of £5,000. She can only set off £5,000 of her Class 4 NICs loss.

Kate has a Class 4 NICs loss of £5000 to carry forward against her share of the Class 4 NICs profits of the partnership.

Year 2:

Employed earners income, taxed under PAYE and liable to Class 1 NICs £20,000
   
A profit from her profession of author £5,000
A share of a partnership profit from a trade £1,000

Kate has a Class 4 NICs loss from the partnership brought forward from year one. She does not have any Case I/II losses brought forward as all the Case I/II loss relief was used in year 1.

Kate can set £1,000 of her Class 4 NICs loss off against her share of the partnership profit. The balance of £4,000 is carried forward against later years.

Kate cannot set the £4,000 Class 4 NICs loss against the £5,000 profit from her profession. This is because a Class 4 NICs loss can only be carried forward against a loss of the same trade. SSCBA92/SCH2/PARA3 states that “relief shall be available under, and in the manner provided by” the provisions in the Taxes Acts.