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Case 1 of Regulation 100, SSCR 2001.

NIM24170 onwards provides guidance on the calculation method used to determine the Class 1, 2 and 4 NICs annual maximum liability for a contributor who is both employed and self- employed during the same tax year. »Ê¹ÚÌåÓýapp calculation method shown applies to tax years from 2003/2004 onwards. For guidance on the Class 1, 2 and 4 NICs maximum for tax years before 2003/2004 see NIM24120 onwards.

»Ê¹ÚÌåÓýapp following example illustrates the Class 1, 2 and 4 NICs maximum calculation for a contributor who falls into Case 1 of regulation 100(3). In this example the contributor, whilst having paid all of the NICs that he is due to pay, does not exceed his maximum. »Ê¹ÚÌåÓýapp contributor is liable to pay Class 4 NICs at a rate of 8% only. This example should be read in conjunction with NIM24175 and NIM24176

»Ê¹ÚÌåÓýapp example uses the rates and limits in force during the 2010/2011 tax year.

Example

Mr Hoy has been self-employed for the whole of the 2010/2011 tax year. His profits for the year amount to £15,000. He has paid £742.80 at the main Class 4 NICs percentage. He has paid 52 Class 2 NICs at £2.40. Mr Hoy also had two part time employed earner’s employments during the 2010/2011 tax year. In the two employments he paid a total of £800 at the main Class 1 NICs percentage. Mr Hoy’s maximum Class 1, 2 and 4 NICs liability is calculated as follows.

Step 1

Subtract the Lower Profits Limit (LPL) from the Upper Profits Limit (UPL)

£43,875 - £5715 = £38,160

Step 2

Multiply the result of step 1 by 8%

£38,160 x 8% = £3052.80

Step 3

Add to the result of step 2, 53 times the weekly rate of Class 2 NICs

£3052.80 + (53 x £2.40) = £3180

Step 4

Subtract from the result of step 3 the aggregate amount of any Class 2 NICs and any primary Class 1 NICs paid at the main primary percentage.

£3180 - £924.80 = £2,255.20

Which Case of regulation 100(3) does Mr Hoy fall into?

If the result of step 4 is a positive figure and it exceeds the aggregate of Class 1 NICs payable at the main primary percentage, Class 2 NICs and Class 4 NICs payable at the main Class 4 NICs percentage on the earnings and profits received for the year, the result of step 4 is the maximum amount of Class 4 NICs due. »Ê¹ÚÌåÓýappre is no need to proceed to any further steps within regulation 100(3).

On his earnings and profits Mr Hoy would be liable, and has paid, a total of £1667.60 in NICs. That is £800 in Class 1 NICs, plus £124.80 in Class 2 NICs plus £742.80 in Class 4 NICs. »Ê¹ÚÌåÓýapp figure produced by step 4 (£2,255.20) is a positive figure and it exceeds £1,667.60. Mr Hoy therefore falls into Case 1 of regulation 100(3). Case 1 provides that the figure of Class 4 produced at step 4 is the maximum amount of Class 4 NICs payable.

Although the maximum amount of Class 4 payable by Mr Hoy is £2,255.20, he is only liable to pay £742.80 in Class 4 NICs because his profits are only £15,000. In this example, the contributor has paid all of the NICs that he is liable to pay but he has not reached his maximum. »Ê¹ÚÌåÓýappre is no question of Mr Hoy being required to pay any further Class 4 NICs.