NIM24176 - Class 4 NICs: structure: annual Class 4 NICs maximum from 6 April 2003: contributors who are employed and self-employed: calculation method: Case 1 of regulation 100(3)
Case 1 of regulation 100(3) of the Social Security Contributions Regulations (SSCR) 2001 (SI 2001 No. 1004)
NIM24175 sets out the calculation method for determining the maximum amount of Class 4 NICs payable by a contributor who is both employed and self-employed and liable to pay Class 1, 2 and Class 4 NICs. Regulation 100(3) provides three cases for these contributors. The maximum calculations vary depending upon which case the contributor falls into.
These three cases are necessary because of the need to ensure that all contributors pay at least 2% in Class 4 NICs on all of their profits and gains. Depending upon the level of a contributor's profits and the amount of Class1 and 2 NICs paid, the maximum amount of Class 4 NICs due will vary. All contributors who are liable to pay both Class 1 and Class 4 NICs will be required to pay either:
- Class 4 NICs at the main Class 4 NICs percentage only
- a mixture of Class 4 NICs at the main Class 4 NICs percentage and the additional Class 4 NICs percentage
- Class 4 NICs at the additional Class 4 NICs percentage only.
Case 1 of regulation 100(3) applies where the result of step 4 of regulation 100(3) 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 percentage
that the contributor would have paid if no maximum existed. To determine this it is necessary to work out the amount of Class 1, 2 and 4 NICs that the contributor would pay:
- on all of his earnings above the primary threshold in each of his employed earner's employments,
- on all of his profits above the LPL
- in Class 2 NICs.
Those contributors who fall into case 1 of regulation 100(3) will be liable to pay Class 4 NICs at the main Class 4 percentage only. The reason for this is that they will:
- have profits for the year which are less than the UPL and so no additional rate Class 4 NICs will be due and
- have paid an amount of Class 1 and/or Class 2 NICs that is less than:
- the main Class 4 percentage on profits between the UPL and LPL plus
- 53 Class 2 NICs
It is important to note that contributors who fall into Case 1 of regulation 100(3) may not be liable to pay the maximum figure calculated by regulation 100. The reason for this is that Case 1 of regulation 100(3) provides a maximum which is based on profits at the UPL.
Where a contributor has paid Class 1, 2 and 4 NICs but has paid less than the Class 4 NICs figure shown at step 4 of regulation 100(3) under Case 1, no further Class 4 NICs are due. In such cases the contributor will not have reached his maximum because he has insufficient profits.
- NIM24181 - provides an example of a contributor who falls into Case 1 of regulation 100(3) and who has not reached his maximum.
From 6 April 2024
There is no Class 2 element of the annual maximum calculation.