ANNEX A: Background on National Insurance for the self-employed Class 4 NICs
13.Those who are self-employed will normally also be liable to pay Class 4 NICs. A Class 4 NICs liability will arise if a self-employed individual’s profits or gains are chargeable to income tax as trading profits.
14.Class 4 NICs do not secure benefit entitlements but are instead intended to equalise, broadly, the levels of NICs paid by both employed and self-employed individuals. They are charged annually as a percentage of the taxable profits (as opposed to earnings) above a lower profits limit (LPL) (for tax year 2014-15 the LPL is £7,956). They are assessed, collected and enforced through the income tax SA system, with some minor differences, for example, Class 4 NICs liability does not arise for tax years after a person reaches state pension age. There are also certain matters which are dealt with outside of the SA system, for example, an application for deferment of Class 4 liability.