NIM24170 - Class 4 NICs: structure: annual Class 4 NICs maximum from 6 April 2003: contributors who are employed and self-employed: general

Regulation 100 of the Social Security Contributions Regulations (SSCR) 2001 (SI 2001 No. 1004)

NIM24151 explains why, despite the introduction of an uncapped Class 4 NICs liability on all profits in excess of the Upper Profits Limit (UPL), an annual Class 4 NICs maximum is required.

Regulation 100, which sets out the annual Class 4 NICs maximum, applies only to contributors who are liable to pay both Class 1 and Class 4 NICs. This means that to apply regulation 100 a contributor must be self-employed with profits exceeding the Lower Profits Limit (LPL) and be an employed earner with earnings, in at least one employment, which exceeds the Primary Threshold. 

The Class 4 NICs annual maximum takes into account any Class 1 or 2 NICs that the person has paid or are payable. Although it takes these contributions into account the new calculation ensures that at least the additional Class 4 NICs percentage in Class 4 NICs is payable on all profits above the LPL. The calculation achieves this by retaining use of Class 2 and 4 maximum. The amount of Class 1 and 2 NICs paid or payable is compared to the Class 2 and 4 NICs maximum. However, instead of providing that the difference between these two figures is the amount of Class 4 NICs due, as was the pre 2003/2004 position, the new Class 4 maximum provides that that figure is the amount of Class 4 due at the main Class 4 percentage rate. This then allows the maximum calculation to provide for any additional Class 4 that may be due on the earner's total profits.

Regulation 100 provides a step by step calculation. See NIM24153 for details. The calculation allows every Class 4 NICs contributor who is subject to a Class 4 NICs annual maximum to fall into one of three categories:

  • those who are due to pay:
    • Class 4 NICs at a rate of the main Class 4 NICs percentage only
  • those who are due to pay:
    • a mixture of Class 4 NICs at rate of the main Class 4 NICs percentage and of the additional Class 4 NICs percentage and
  • those who are due to pay:
    • Class 4 NICs at a rate of the additional Class 4 NICs percentage only

The amount of a contributor's profits and the amount of Class 1 and 2 NICs that have been paid or are payable will determine into which of the three categories the contributor falls. Regulation 100 deals with these three categories by labelling them Case 1, Case 2 and Case 3.

  • NIM24175 explains the general calculation method adopted by regulation 100.
  • NIM24176, explains the calculation method for case 1
  • NIM24177, explains the calculation method for case 2
  • NIM24178, explains the calculation method for case 3 and
  • NIM24180 onwards provides examples for each of the three cases.
  • NIM24050 provides a list of rates for Class 4 from the 2003-2004 tax year

From 6 April 2024

There is no Class 2 element of the annual maximum calculation.