NIM24175 - Class 4 NICs: structure: annual Class 4 NICs maximum from 6 April 2003: contributors who are employed and self-employed: calculation method
Regulation 100 of the Social Security Contributions Regulations (SSCR) 2001 (SI 2001 No.1004)
To determine the maximum amount of Class 4 NICs payable for a year by a contributor, who has paid Class 1, or Class 1 and Class 2 NICs in the same year, the following calculation are used.
From 6 April 2003 to 5 April 2011.
Step 1
Subtract the Lower Profits Limit from the Upper Profits Limit for that year
Step 2
Multiply the result of step 1 by 8%
Step 3
Add to the result of step 2, 53 Class 2 NICs at the rate in force for the year
Step 4
Subtract from the result of step 3 the total amount of any Class 2 NICs and any Class 1 NICs at the main primary percentage that the contributor has paid.
The next steps are determined by reference to the following three cases.
Case 1
If the result of step 4 is a positive value and exceeds the aggregate of:
- primary Class 1 NICs payable at the main percentage
- Class 2 NICs and
- Class 4 NICs payable at the main Class 4 NICs percentage
that the contributor would have paid if no maximum existed, the result of this step is the maximum amount of Class 4 NICs that the contributor is liable to pay. There is no need to proceed to any further steps.
Case 2
If the result of step 4 is a positive value but does not exceed the aggregate of:
- primary Class 1 NICs payable at the main percentage
- Class 2 NICs and
- Class 4 NICs payable at the main Class 4 percentage
that the contributor would have paid if no maximum existed, the result of this step is the maximum amount of Class 4 NICs that the contributor is liable to pay at 8%. The calculation then continues at step 5.
Case 3
If the result of this step is a negative value, the maximum amount of Class 4 NICs payable at the main Class 4 NICs percentage is nil and the result of this step is treated as nil. The calculation then continues at step 5.
Step 5
Multiply the result of step 4 by 100/8
Step 6
Subtract the Lower Profits Limit from the lesser of the Upper Profits Limit and the contributor’s actual amount of profits for the year
Step 7
Subtract the result of step 5 from the result of step 6. If the result of this is a negative value it is treated as nil
Step 8
Multiply the result of step 7 by 1%
Step 9
Multiply the amount by which the profits and gains for the year exceed the Upper Profits Limit by 1%.
Where Case 1 applies, the maximum amount of Class 4 NICs payable is the figure shown at step 4
Where Case 2 or Case 3 applies, the maximum amount of Class 4 NICs payable is the aggregate of steps 4, 8 and 9.
From 6 April 2011
Step 1
Subtract the Lower Profits Limit from the Upper Profits Limit for that year
Step 2
Multiply the result of step 1 by 9% (9.73% for the 2022 to 2023 tax year)
Step 3
Add to the result of step 2, 53 Class 2 NICs at the rate in force for the year
Step 4
Subtract from the result of step 3 the total amount of any Class 2 NICs and any Class 1 NICs at the main primary percentage that the contributor has paid.
The next steps are determined by reference to the following three cases.
Case 1
If the result of step 4 is a positive value and exceeds the aggregate of:
- primary Class 1 NICs payable at the main percentage
- Class 2 NICs and
- Class 4 NICs payable at the main Class 4 NICs percentage
that the contributor would have paid if no maximum existed, the result of this step is the maximum amount of Class 4 NICs that the contributor is liable to pay. There is no need to proceed to any further steps.
Case 2
If the result of step 4 is a positive value but does not exceed the aggregate of:
- primary Class 1 NICs payable at the main percentage
- Class 2 NICs and
- Class 4 NICs payable at the main Class 4 percentage
that the contributor would have paid if no maximum existed, the result of this step is the maximum amount of Class 4 NICs that the contributor is liable to pay at 9% (9.73% for the 2022 to 2023 tax year). The calculation then continues at step 5.
Case 3
If the result of this step is a negative value, the maximum amount of Class 4 NICs payable at the main Class 4 NICs percentage is nil and the result of this step is treated as nil. The calculation then continues at step 5.
Step 5
Multiply the result of step 4 by 100/9 (use 100/9.73 for the 2022 to 2023 tax year)
Step 6
Subtract the Lower Profits Limit from the lesser of the Upper Profits Limit and the contributor’s actual amount of profits for the year
Step 7
Subtract the result of step 5 from the result of step 6. If the result of this is a negative value it is treated as nil
Step 8
Multiply the result of step 7 by 2% (2.73% for the 2022 to 2023 tax year)
Step 9
Multiply the amount by which the profits and gains for the year exceed the Upper Profits Limit by 2% (2.73% for the 2022 to 2023 tax year).
Where Case 1 applies, the maximum amount of Class 4 NICs payable is the figure shown at step 4
Where Case 2 or Case 3 applies, the maximum amount of Class 4 NICs payable is the aggregate of steps 4, 8 and 9.