NIM24615 - Class 4 NICs: computation of liability: losses: example
Kate is completing her Self-Assessment Return. In the period she
has:
Year 1:
| Employed earners income, taxed under PAYE and liable for Class 1 NICs | £20,000 |
| A profit from her profession of author | £5,000 |
| A share of a partnership loss from a trade | £10,000 |
Kate elects to set both the Income Tax loss and the Class 4 NICs
loss against other income of the year.
She has other income liable to Income Tax in the year of
£25,000. She can relieve the whole of her loss, £10,000.
She has other profits liable for Class 4 NICs of £5,000.
She can only set off £5,000 of her Class 4 NICs loss.
Kate has a Class 4 NICs loss of £5000 to carry forward
against her share of the Class 4 NICs profits of the partnership.
Year 2:
| Employed earners income, taxed under PAYE and liable for Class 1 NICs | £20,000 |
| A profit from her profession of author | £5,000 |
| A share of a partnership profit from a trade | £1,000 |
Kate has a Class 4 NICs loss from the partnership brought
forward from year one. She does not have any tax losses brought
forward as all the tax loss relief was used in year 1.
Kate can set £1,000 of her Class 4 NICs loss off against
her share of the partnership profit. The balance of £4,000 is
carried forward against later years.
Kate cannot set the £4,000 Class 4 NICs loss against the
£5,000 profit from her profession. This is because a Class 4
NICs loss can only be carried forward against a loss of the same
trade. Paragraph 3 of Schedule 2 SSCBA 1992 states that
“relief shall be available under, and in the manner provided
by” the provisions in the Taxes Acts.
