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HMRC internal manual

National Insurance Manual

Class 4 NICs: computation of liability: earnings from employed earner’s employment taxable as income from a trade, profession or vocation

Regulation 94 SS(C)R 2001

Some people who are liable to Income Tax as self-employed pay Class 1 NICs under the Categorisation of Earners Regulations 1978. These people are exempted from paying Class 4 NICs on that income by Regulation 94 SS(C)R 2001.

In some cases, such as entertainers, the individual may, for the purposes of National Insurance, earn part of their income from an ‘employed earners employment’, subject to Class 1 NICs, and part from a self-employment subject to Class 4 NICs.

For Income Tax purposes there is only one activity, the trade of entertainer, assessable under Case I/II of Schedule D. In this situation the entertainer pays Class 4 NICs on the profits chargeable under Case I of Schedule D less the sum on which Class 1 NICs has been paid.


Paula is an actress. She has a number of engagements during the year. The income from some of these contracts is ‘employed earners employment’ on which she pays Class 1 NICs.

  • Paula had total income in the year of £40,000.
  • Paula had allowable expenses of £10,000.
  • Paula’s profit assessable to Income Tax under Case II of Schedule D was £30,000.

However this profit figure includes income from employed earners employment of £20,000. Paula does not pay Class 4 NICs on this income (Regulation 94 SS(C)R 2001).

Paula has to deduct the income from the employed earners employment to arrive at her Class 4 NICs:

Income Tax profits £30,000
Less: Salary subject to Class 1 NICs £20,000
Class 4 profits £10,000