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HMRC internal manual

National Insurance Manual

Class 4 NICs: computation of liability: earnings from employed earner’s employment included in the calculation of the profits of a trade, profession or vocation

Regulation 94A SS(C)R 2001

From 2003/04 onwards, self-employed who introduce income, which was subject to Class 1 NICs, into their computation of business profits are entitled to relief from Class 4 NICs on that amount.


Kate is a self-employed doctor. As part of her profession, she receives £2,000 of employment income, which she includes as ordinary professional receipts within Case II of Schedule D in accordance with the practice set out at BIM40355 and EIM03002.

Although Kate chooses to include this income in her computation of profits under Case II of Schedule D, she has to pay Class 1 NICs.

Kate’s profit from her profession is £78,000. This includes £2,000 Income from employed earners employment subject to Class 1 NICs.

Kate’s Class 4 NICs Profits are her assessable profit for Case II of Schedule D, £78,000 less the £2,000 Income from employed earners employment subject to Class 1 NICs.

Kate’s Class 4 NICs profit is £76,000.

Partnership Example

Joe and his brother, Pete, run a sub-post office, which is combined with a retail business.

  • Joe is the sub-postmaster and receives a salary of £15,000 on which Class 1 NICs has been paid.
  • Joe introduces the salary into the combined retail business/sub post office.
  • The business has net profits of £40,000.
  • The two partners share the profits equally.

Position for class 4 purposes

Joe (sub-postmaster)

Profit share 50% £20,000
Less the sub-postmasters salary on which he has paid Class 1 NICs £15,000
Class 4 NICs profits £5,000


Profit share 50% £20,000
Class 4 NICs profits £20,000

Only Joe, as the sub-postmaster was paid the post office salary and so only Joe has paid Class 1 NICs, and so only Joe is entitled to relief under Regulation 94A SS(C)R 2001.