NIM24178 - Class 4 NICs: structure: annual Class 4 maximum from 6 April 2003: contributors who are employed and self- employed: calculation method - Case 3 of regulation 100(3)
Case 3 of Regulation 100(3) of the Social Security (Contributions) Regulations 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 and the calculations used 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% (2.73% for the 2022 to 2023 tax year) in Class 4 NICs on all of their profits. Depending upon the level of a contributor's profits and the amount of Class 1 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 3 of regulation 100(3) applies where the result of step 4 of regulation 100(3) produces a negative figure.
Those contributors who fall into Case 3 of regulation 100(3) will be liable to pay Class 4 NICs at 2% (2.73% for the 2022 to 2023 tax year) only on all of their profits above the LPL. The reason for this is that they will have paid an amount of Class 1 and/or Class 2 NICs that is more than:
- the main Class 4 NICs percentage on profits between the UPL and LPL plus
- 53 Class 2 NICs
It is important to note that regulation 100 provides contributors who fall into Case 3 of regulation 100(3) with their exact maximum. This contrasts with contributors who fall into Case 1 of regulation 100(3) - see NIM24176. Where a contributor has paid more Class 4 NICs than regulation 100(3) requires, an excess refund will be due.
- NIM24184 - provides an example of a contributor who falls into Case 3 of regulation 100(3) but who is not required to pay additional rate Class 4 NICs because the profits do not exceed the UPL.
- NIM24185 - provides an example of a contributor who falls into Case 3 of regulation 100(3) and who is required to pay additional rate Class 4 NICs because the profits exceed the UPL
In both examples the contributor is, however, required to pay Class 4 NICs at the additional Class 4 NICs percentage because the amount of Class 1 and 2 NICs paid exceeds:
- the main Class 4 NICs percentage on profits between the UPL and LPL, plus
- 53 Class 2 NICs
From 6 April 2024
There is no Class 2 element of the annual maximum calculation.