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View the related Tax Guidance about Health and social care levy

Class 4 national insurance contributions

Class 4 national insurance contributionsWhat is Class 4 NIC?Class 2 and Class 4 national insurance contributions (NIC) are paid by self-employed individuals and partners in a partnership on their profits arising within the UK. This guidance note considers Class 4 contributions. For Class 2 contributions which are to be abolished from 6 April 2024, see the Class 2 national insurance contributions guidance note. For relevant types of NIC in relation to employed people, see the Overview of NIC Classes, rates and thresholds guidance note.Class 4 contributions are essentially a profit-based tax; there is no attached state benefit entitlement. A Class 4 NIC calculation depends on the level of profits in a tax year, the individual is only liable to pay Class 4 NIC if their profits are over the lower profits limit and there is a lower rate if profits are above the upper profits limit, see details below. ‘Profits’ for Class 4 purposes includes all profits from a trade, profession or vocation conducted in the UK and are chargeable under ITTOIA 2005, ss 5–23. The calculation of profits for Class 4 purposes is made on the same basis as profits for income tax purposes and this includes any additional transition profits which may arise from the reform of basis periods in 2023/24 and which are then spread over the following four years, see the Basis period transitional rules 2023/24 guidance note. For further reading on Class 4 NIC, see Simon’s Taxes E8.316.Class 4 NIC ― rates and thresholdsClass

Repayments of NIC arising from two or more jobs

Repayments of NIC arising from two or more jobsHow an overpayment of NIC can ariseThere is an annual maximum of contributions applying to any individual for a contribution year (tax year). This applies where the earner either:•has two employments (and is therefore paying Class 1 national insurance contributions (NIC) twice)•is both employed and self-employed (and is therefore paying Class 1, 2 and 4 NIC)There is a proforma that must be followed to calculate whether a repayment is due. See below.The start of a new tax year might require some consideration as to NIC paid in the past and a look ahead to the future, depending on a taxpayer’s current circumstances. For example, an application might need to be made to defer Class 1 contributions or an existing deferral renewed.Changes that apply to the 2024/25 tax yearThe mandatory requirement to pay Class 2 NIC is removed from 2024/25 onwards. Those below the small profits threshold can continue to pay Class 2 NIC voluntarily to protect their state benefit entitlements. See the Class 2 national insurance contributions guidance note. This requires secondary legislation to amend the annual maximum calculations discussed below. HMRC confirmed to Tolley in November 2023 that there is no time scale as to when this legislation will be introduced. Therefore it is not possible to update the calculations in this guidance note at the time of writing and so the tests below do not apply for the 2024/25 tax year onwards.The main rate of Class 4