Class 2 NICs test raw self-employment income, not the Class 4 profits s.11(3) makes relevant profits #2086

Problem

ni_class_2 decides liability on raw self-employment income:

profits = person("self_employment_income", period)

Section 11 of the Social Security Contributions and Benefits Act 1992 keys Class 2 on "relevant profits". Section 11(3), in the same words in the text in force on 6 April 2015, on 6 April 2023 and today, defines them as:

"Relevant profits" means profits, from the employment, in respect of which Class 4 contributions are payable under section 15 for the relevant tax year (or would be payable if the amount of the profits were to exceed the amount specified in subsection (3)(a) of that section in excess of which the main Class 4 percentage is payable).

So the s.11(2) liability test is applied to Class 4 profits. Those are after capital allowances, the trading allowance and the losses that Sch. 2 para. 3 allows. The same goes for the s.11(5A)-(5B) treated-as-paid rule and the s.11(6) voluntary rule. #1919 adds this measure as ni_class_4_profits.

As long as ni_class_2 reads self_employment_income, the model charges Class 2 in years where s.11(2) applies to someone whose profits pass the threshold only before those deductions. Section 11(2) is omitted from 2024-25, so the liability change is limited to earlier years. The model does not compute the s.11(5B) credit.

Fix

• In ni_class_2, read ni_class_4_profits (from Charge Class 4 NICs on Chapter 2 profits, after capital allowances, the trading allowance and Schedule 2 losses #1919) instead of self_employment_income.
• Fix Class 2 and Class 4 NICs against SSCBA 1992 for 2015-16 to 2026-27 #2058 rewrites the ni_class_2 formula for 2022-23 and 2023-24 (the lower profits threshold) and still reads self_employment_income. Make this change after Charge Class 4 NICs on Chapter 2 profits, after capital allowances, the trading allowance and Schedule 2 losses #1919 and Fix Class 2 and Class 4 NICs against SSCBA 1992 for 2015-16 to 2026-27 #2058 merge.
• Add YAML cases for years when s.11(2) applies. Where profits are above the threshold only before capital allowances, the trading allowance or a loss, Class 2 should be nil.

Raised as item 4 of the review of #1919. #1887 covers Class 2 rates and thresholds, not this.