NIM24051 | Class 4 NICs: structure from 6 April 2003: calculation of Class 4 NICs from 6 April 2003: examples

The following examples illustrate how liability for Class 4 NICs is calculated following the introduction of a Class 4 NICs liability on all profits or gains above the Upper Profits Limit (UPL).

The examples use the Class 4 NICs rates and limits in force during the 2018/2019 tax year.

The Upper Profits Limit (UPL) is £46350 and the Lower Profits Limit (LPL) is £8424

Example 1 - profits do not exceed the UPL

Ms C Danvers has been self-employed for the whole of the 2018/2019 tax year. Her total profits from her self-employment for the year are £40,000. The amount of Class 4 NICs due is calculated as follows:

Profits between the LPL and UPL = £40,000 (actual profits) - £8424 = £31576

Profits in excess of the UPL = Nil

Class 4 NICs due at:

• the main Class 4 NICs percentage = £31576 x 9% = £2841.84

• the additional Class 4 NICs percentage = Nil

Total Class 4 NICs due = £2841.84

In addition to her Class 4 NICs liability Ms Danvers will also be liable to pay Class 2 NICs.

Example 2 - profits exceed the UPL

Mr D Blake has been self-employed for the whole of the 2018/2019 tax year. His total profits from his self-employment for the year are £80,000. The amount of Class 4 NICs due is calculated as follows:

Profits between the LPL and UPL = £46350 - £8424 = £37926

Profits in excess of the UPL = £80,000 - £46350 = £33650

Class 4 NICs due at:

• the main Class 4 NICs percentage = £37926 x 9% = £3413.34

• the additional Class 4 NICs percentage = £33650 x 2% = £673.00

Total Class 4 NICs due = £3413.34 + £673.00 = £4086.34

In addition to his Class 4 NICs liability Mr Blake will also be liable to pay Class 2 NICs.