Class 4 National Insurance Contributions maximum charge when Class 1 contributions are also paid

What is meant by 'maximum charge'

HMRC's annual Class 4 National Insurance Contribution (NIC) maximum is the device that limits the amount of Class 4 NICs payable in a tax year in addition to any Class 1 and 2 NICs payable.

This means that an individual who is both employed and self-employed is required to pay, broadly, the same amount of NICs as a person who has equivalent earnings but solely from being an employee. Due to the uncapped Class 4 NICs liability on profits above the Upper Earnings Limit since 2003, there can no longer be a universal maximum figure applying to contribution payers. Instead, all taxpayers who are both employed and self-employed are provided with an individualised maximum which is determined by reference to individual profits and the amount of Class 1 and 2 NICs paid.

How to make entries for the maximum charge in TaxCalc

The Class 4 NIC maximum charge entry boxes can be found in:

• SimpleStep > Working out your tax > Class 2 & Class 4 NIC's maximum charge.
• HMRC Forms mode > Self-Employment short form > page 2 > box 36 > click on the wizard  or
• HMRC Forms mode > Self-Employment full form > page 5 > box 100 > click on the wizard

These will be automatically populated if you are using 'Fetch taxpayer data' for the employment records. However, if the data is not available*, you you will need access to a P60 or to an online HMRC personal tax account to determine the two amounts required. We provide details on screen to explain which amounts are required in each box.

* HMRC have to amalgamate the payroll data onto the self assessment system and the process can take several months after submission of year end payroll returns.

Why HMRC may issue a revised calculation ignoring the Class 4 maximum

Taxpayers filing earlier in the year may find that the time delay between the information from employer’s PAYE filings being received and processed to an employee’s NIC record means that the HMRC calculation will not take into account the amount of Class 1 NICs paid. As a result HMRC may issue a revised assessment for tax and NIC, following filing of a return with reduced Class 4 payable.

What to do if you receive a revised calculation 

If you have verified that Class 1 NIC has been paid and the revised calculation does not take these into account when calculating Class 4 NIC, HMRC advise to contact the self assessment helpline.

HMRC Contact Information

Self Assessment address: HM Revenue and Customs, Pay As You Earn and Self Assessment, BX9 1AS