Class 4 NIC: Self Employed: Calculate Your Contributions with Ease

1. Introduction to Class 4 NIC Contributions

1. What are Class 4 NIC Contributions?

Class 4 national Insurance contributions (NICs) are a mandatory payment for self-employed individuals in the UK who earn above a certain threshold. These contributions are based on their annual profits, and the funds raised are used to provide social security benefits such as the State Pension and Maternity Allowance. Understanding how Class 4 NIC contributions work is essential for anyone in self-employment, so let's delve into the details.

2. Calculating Class 4 NIC Contributions

Calculating your Class 4 NIC contributions may seem daunting at first, but it's relatively straightforward once you grasp the underlying principles. As a self-employed individual, your profits for the tax year determine the amount of Class 4 NICs you need to pay. Currently, the Class 4 NIC rate stands at 9% on profits between 9,568 and 50,270, and 2% on profits above 50,270. Let's look at an example to understand this better:

Suppose your annual profit is 35,000. To calculate your Class 4 NIC contributions, you would first deduct the lower earnings limit (9,568) from your profit (35,000). The resulting figure (25,432) is then multiplied by the Class 4 NIC rate of 9% to obtain your contribution amount (2,288.88).

It's worth noting that Class 4 NICs are separate from Class 2 NICs, which are also payable by self-employed individuals. Class 2 contributions have a lower threshold and a fixed weekly rate, while Class 4 contributions are percentage-based.

3. Overlapping Employment and Class 4 NICs

If you have overlapping employment and self-employment, the calculation for Class 4 NIC contributions becomes a bit more complicated. However, there's no need to worry; HM Revenue and Customs (HMRC) will ensure you don't pay more than you owe by adjusting your contributions accordingly. Here's a handy tip:

When completing your Self Assessment tax return, be sure to provide accurate information regarding your employment and self-employment income. HMRC will use this data to calculate your Class 4 NICs correctly.

4. Case Study: Changing Profit Levels

Let's explore a case study to see how Class 4 NIC contributions can change when profit levels fluctuate. Consider a self-employed photographer whose profits vary from year to year. In one tax year, their profit was 30,000, while in the following year, it increased to 45,000. Here's how their Class 4 NIC contributions would differ based on these profit levels:

For the tax year with 30,000 profit:

- Class 4 NIC rate (9%) is applied to the profitable amount (20,432) resulting in contributions of approximately 1,839.88.

For the tax year with 45,000 profit:

- The Class 4 NIC rate (9%) is first applied to the band between 9,568 and 50,270 (20,432) resulting in contributions of approximately 1,839.88.

- The Class 4 NIC rate (2%) is then applied to the excess profit above 50,270 (45,000 - 50,270 = -5,270), resulting in contributions of approximately -105.40.

- The calculated amounts for both bands are added, giving a total Class 4 NIC contribution of approximately 1,734.48.

As demonstrated above, the changing profit levels lead to different Class 4 NIC contributions, highlighting the importance of accurately calculating these contributions each tax year.

Understanding Class 4 NIC contributions is vital for all self-employed individuals in the UK. By grasping how to calculate and account for these contributions, you can ensure compliance with HMRC and accurately plan your finances. Remember, seeking professional advice or utilizing the HMRC resources available can provide further clarity on any specific circumstances you may encounter.

2. What You Need to Know?

3. Class 4 NIC: What You Need to Know

Understanding Class 4 National Insurance Contributions (NIC) is essential for self-employed individuals to accurately calculate and manage their contributions. While Class 2 NIC is mandatory for most self-employed individuals, Class 4 NIC is based on profits and is only applicable if your profits exceed a certain threshold. In this section, we will delve deeper into Class 4 NIC, providing you with the necessary information to navigate this aspect of your self-employment journey.

1. Thresholds and Rates:

Class 4 NIC is calculated based on your annual profits, which are subject to two different thresholds. For the tax year 2021/2022, the thresholds are as follows:

- Lower Profits Threshold: 9,568

- Upper Profits Threshold: 50,270

Once your profits exceed the lower profits threshold, you become liable to pay Class 4 NIC. The rate of Class 4 NIC is 9% on profits between the lower and upper thresholds. Any profits above the upper threshold are subject to a reduced rate of 2%.

2. Calculating Class 4 NIC:

Calculating your Class 4 NIC can be done by following these simple steps:

A. Determine your annual profits from self-employment.

B. If your profits are below the lower profits threshold, you are exempt from Class 4 NIC.

C. If your profits fall between the lower and upper profits thresholds, multiply the profits by 9% to calculate the Class 4 NIC.

D. If your profits exceed the upper profits threshold, multiply the profits between the upper threshold and the total profits by 2% and add it to the Class 4 NIC calculated in the previous step.

For example, if your annual profits are 40,000, your Class 4 NIC calculation would be as follows:

(40,000 - 9,568) x 9% = 2,872.64

3. Class 4 NIC and Class 2 NIC:

It's important to note that Class 4 NIC is separate from Class 2 NIC. While Class 4 NIC is based on profits, Class 2 NIC is a flat weekly rate that is payable by most self-employed individuals, regardless of their profits.

For instance, if your profits are below the lower profits threshold and you are exempt from Class 4 NIC, you may still need to pay Class 2 NIC, which is currently set at 3.05 per week.

4. Tips for Managing Class 4 NIC:

To effectively manage your Class 4 NIC, consider the following tips:

- Keep accurate records of your self-employment income and expenses to calculate your profits correctly.

- Regularly review your profits to ensure you stay within the thresholds and avoid any surprises at the end of the tax year.

- consult with a tax advisor or accountant who can provide guidance on your specific circumstances and help you optimize your tax position.

5. Case Study: John's Self-Employment Journey:

To illustrate the impact of Class 4 NIC, let's consider John, a freelance graphic designer. In a tax year, John's profits from self-employment amount to 55,000. Here's how his Class 4 NIC would be calculated:

- (50,270 - 9,568) x 9% = 3,869.62 (profits within upper threshold)

- (55,000 - 50,270) x 2% = 95.46 (profits above upper threshold)

Total Class 4 NIC: 3,869.62 + 95.46 = 3,965.08

By understanding Class 4 NIC and accurately calculating his contributions, John can effectively budget for his tax liabilities and ensure compliance with HMRC regulations.

Class 4 NIC is an important aspect of self-employment that requires understanding and careful calculation.

3. A Step-by-Step Guide

1. Class 4 NIC Contributions: A step-by-Step guide

Calculating your Class 4 National Insurance Contributions (NIC) as a self-employed individual can be a daunting task, but with a step-by-step approach, it becomes much more manageable. In this guide, we will break down the process into easy-to-follow steps, providing examples and tips along the way to help you accurately calculate your contributions.

2. Determine your profits

The first step in calculating your Class 4 NIC contributions is to determine your annual profits. This can be done by subtracting your allowable business expenses from your total income. For instance, if your business income for the tax year is 50,000 and your allowable expenses amount to 10,000, your annual profits would be 40,000.

3. Check the Class 4 NIC thresholds

Next, it's important to be aware of the Class 4 NIC thresholds set by HM Revenue and Customs (HMRC). As of the 2021/2022 tax year, the lower profits limit is 9,568, the upper profits limit is 50,270, and the rate above the upper profits limit is 2%.

4. Calculate Class 4 NIC contributions

Once you have determined your profits and are aware of the thresholds, you can calculate your Class 4 NIC contributions. The contributions are calculated as a percentage of your annual profits that fall within the thresholds.

- For profits between the lower profits limit and the upper profits limit, the Class 4 NIC rate is 9%. Using the previous example, if your annual profits were 40,000, your contributions for this bracket would be 3,600 (9% of 40,000).

- For profits above the upper profits limit, the Class 4 NIC rate is 2%. Let's say your annual profits were 60,000. In this case, your contributions for the portion above the upper profits limit would be 200 (2% of 10,000, which is the excess over the upper profits limit).

5. Deduct any available allowances or reductions

It's worth noting that there are certain allowances and reductions available that can lower your Class 4 NIC contributions. For example, the Class 4 NIC Small Profits Threshold allows individuals with profits below 6,515 to pay a reduced rate or even be exempt from Class 4 NIC contributions altogether. Additionally, if you qualify for the Class 4 NIC Deferral Certificate, you may be able to defer your contributions until a later date.

6. Review your calculations and seek professional advice if needed

Once you have calculated your Class 4 NIC contributions, it's important to review your calculations to ensure accuracy. If you have any doubts or complex circumstances, it is always advisable to seek professional advice from an accountant or tax specialist. They can help you navigate any intricacies and ensure you are meeting your obligations while taking advantage of any available allowances or reductions.

By following these step-by-step instructions, you can confidently calculate your Class 4 NIC contributions as a self-employed individual. Remember to keep track of your profits, stay updated on the thresholds set by HMRC, and seek professional advice when needed. Taking control of your NIC contributions will not only help you meet your obligations but also ensure you are making the most of any available allowances or reductions.

4. Who Needs to Pay Class 4 NIC?

1. Self-employment can be a rewarding and fulfilling career path, but it also comes with certain responsibilities, including paying National Insurance Contributions (NICs). As a self-employed individual, you may be familiar with Class 2 NICs, which are paid by most self-employed people. However, there is another type of NIC that you need to be aware of - Class 4 NICs. In this section, we will delve into the exemptions and thresholds for Class 4 NICs, helping you understand whether you need to pay them or not.

2. Class 4 NICs are calculated based on your annual profits from self-employment. If your profits exceed a certain threshold, you will be required to pay Class 4 NICs in addition to Class 2 NICs. The threshold for the 2021/22 tax year is 9,568. This means that if your profits are below this threshold, you are exempt from paying Class 4 NICs.

3. Let's take an example to illustrate this further. Suppose you are a self-employed graphic designer and your annual profits for the tax year are 8,000. Since this amount is below the Class 4 NIC threshold, you would not be required to pay any Class 4 NICs. However, you would still be liable for Class 2 NICs, which are currently set at 3.05 per week.

4. On the other hand, if your profits exceed the Class 4 NIC threshold, you will need to pay Class 4 NICs. The rate for Class 4 NICs is currently set at 9% on profits between the lower and upper thresholds, and 2% on profits above the upper threshold. For the 2021/22 tax year, the lower threshold is 9,568 and the upper threshold is 50,270.

5. Let's consider another example. Suppose you are a self-employed photographer and your annual profits for the tax year are 30,000. Since your profits fall within the range between the lower and upper thresholds, you would need to pay Class 4 NICs. The calculation would be as follows: 9% on the profits between 9,568 and 30,000, and 2% on the profits above 30,000.

6. It's worth noting that Class 4 NICs are subject to an annual maximum contribution limit. For the 2021/22 tax year, the maximum limit is 3,875. This means that even if your profits exceed the upper threshold, you will only pay Class 4 NICs on a maximum of 50,270. Any profits above this amount will not attract Class 4 NICs.

7. In conclusion, understanding the exemptions and thresholds for Class 4 NICs is crucial for self-employed individuals. By knowing whether you are eligible for an exemption or fall within the thresholds, you can accurately calculate your NICs and ensure compliance with HM Revenue and Customs (HMRC). Remember to keep track of your profits, consult with a tax advisor if needed, and stay up to date with any changes in the thresholds and rates to ensure you are paying the correct amount of Class 4 NICs.

5. How Much Do You Need to Contribute?

Class 4 NIC Rates: How Much Do You Need to Contribute?

1. Understanding Class 4 National Insurance Contributions (NIC) is crucial for self-employed individuals. These contributions are a way for self-employed individuals to contribute towards their state pension and other benefits. However, it can be confusing to determine how much you need to contribute. In this section, we will break down the different Class 4 NIC rates and provide you with the information you need to calculate your contributions with ease.

2. Class 4 NIC rates are based on your annual profits as a self-employed individual. There are two different rates depending on your profit levels. For profits below the Small Profits Threshold (SPT), you do not need to pay Class 4 NIC. However, once your profits exceed the SPT, you will need to contribute a percentage of your profits.

3. The Small Profits Threshold for the tax year 2021/2022 is set at 6,515. If your profits fall below this threshold, you will not need to pay any Class 4 NIC. This threshold ensures that individuals with lower profits are not burdened with additional contributions.

4. For profits above the Small Profits Threshold, Class 4 NIC rates are as follows:

- 9% on profits between 6,515 and 9,568

- 2% on profits above 9,568

5. Let's look at an example to illustrate how these rates work. Suppose you have annual profits of 12,000 as a self-employed individual. The first step is to deduct the Small Profits Threshold from your profits. In this case, 12,000 - 6,515 = 5,485. This amount falls within the first rate bracket, so you will need to contribute 9% of 5,485, which equals 493.65.

6. It's important to note that Class 4 NIC rates are subject to change each tax year, so it's essential to stay updated with the latest rates. HM Revenue and Customs (HMRC) provides guidance on their website, or you can consult with a tax advisor for accurate information.

7. Here are a few tips to keep in mind when calculating your Class 4 NIC contributions:

- Keep track of your profits throughout the tax year to ensure accurate calculations.

- Consider using accounting software or hiring an accountant to help you manage your finances and calculate your contributions correctly.

- Plan ahead and set aside funds for your Class 4 NIC contributions to avoid any surprises at the end of the tax year.

8. Case studies can also provide valuable insights into how Class 4 NIC rates can impact self-employed individuals. For example, if you have fluctuating profits, it's crucial to consider the impact on your Class 4 NIC contributions. Higher profits will result in higher contributions, so it's essential to budget accordingly.

9. In conclusion, understanding Class 4 NIC rates is essential for self-employed individuals to accurately calculate their contributions. By knowing the rates and thresholds, keeping track of your profits, and planning ahead, you can ensure that you contribute the correct amount towards your state pension and other benefits. Stay informed and seek professional advice when needed to navigate the complexities of Class 4 NIC contributions.

6. Tips and Strategies

1. Understand the Class 4 NIC Contribution System

Class 4 National Insurance Contributions (NICs) can often seem complex and confusing, especially for those who are self-employed. However, by understanding the system and implementing effective strategies, you can maximize your contributions and ensure you're making the most of your self-employment earnings. Let's dive into some helpful tips and strategies to help you navigate the Class 4 NIC system.

2. Keep Track of Your Earnings

One of the most important steps in maximizing your Class 4 NIC contributions is to accurately track your earnings. This includes keeping records of your self-employment income, as well as any other sources of income you may have. By having a clear understanding of your earnings, you can ensure that you're paying the correct amount of Class 4 NICs and avoid any potential underpayment or overpayment issues.

For example, let's say you're a freelance graphic designer who earns income from various clients. Keeping track of each payment received and documenting it accurately will help you calculate your Class 4 NIC contributions more efficiently.

3. Understand the Class 4 NIC Thresholds and Rates

It's crucial to be aware of the Class 4 NIC thresholds and rates in order to plan your contributions effectively. As of the tax year 2021/2022, Class 4 NICs are payable on profits above 9,568 and up to 50,270. The rate is 9% on profits between these thresholds and 2% on profits above 50,270.

Let's consider a self-employed photographer whose profits for the year amount to 30,000. In this case, their Class 4 NIC contributions would be calculated as follows:

- 30,000 (profits) - 9,568 (lower threshold) = 20,432 (profits subject to 9% rate)

- 20,432 x 0.09 (9%) = 1,838.88 (Class 4 NIC contributions)

Understanding these thresholds and rates will help you estimate and plan your contributions accordingly.

4. Consider Making Voluntary Class 4 NIC Contributions

If you're self-employed and your profits fall below the Class 4 NIC thresholds, you may still consider making voluntary contributions. While it's not mandatory, making voluntary Class 4 NIC payments can help you build up qualifying years towards your State Pension entitlement. This can be particularly beneficial if you have gaps in your National Insurance record.

For instance, let's say you had a year with lower profits due to unforeseen circumstances, and your earnings were below the Class 4 NIC thresholds. By making voluntary contributions for that year, you can ensure that it counts towards your State Pension entitlement.

5. Seek Professional Advice

Navigating the complexities of Class 4 NIC contributions can be overwhelming, especially if you're unfamiliar with the system. Seeking professional advice from an accountant or tax advisor who specializes in self-employment can provide invaluable guidance tailored to your specific circumstances. They can help you understand the intricacies of the Class 4 NIC system, identify any potential deductions or allowances, and ensure you're maximizing your contributions.

By understanding the Class 4 NIC contribution system, keeping track of your earnings, familiarizing yourself with the thresholds and rates, considering voluntary contributions, and seeking professional advice, you can effectively maximize your Class 4 NIC contributions as a self-employed individual. By implementing these tips and strategies,

7. What's the Difference?

1. Class 4 NIC vs. Class 2 NIC: What's the Difference?

When it comes to calculating your National Insurance Contributions (NIC) as a self-employed individual, it's essential to understand the different classes and how they affect your contributions. In the United Kingdom, self-employed individuals are required to pay NIC to contribute towards their state pension and other benefits. In this section, we will explore the difference between Class 4 NIC and Class 2 NIC, helping you navigate the complexities of self-employment taxes.

2. Class 2 NIC: Basic Contributions for Self-Employed

Class 2 NIC is the most straightforward and basic form of NIC for self-employed individuals. It is a flat-rate contribution that is payable by anyone earning more than a certain threshold. For the tax year 2021/2022, the threshold is set at 6,515. If your annual profits surpass this threshold, you will be liable to pay Class 2 NIC. The current rate for Class 2 NIC is 3.05 per week.

3. Class 4 NIC: Profits-Based Contributions

Class 4 NIC, on the other hand, is calculated based on your profits as a self-employed individual. Unlike Class 2 NIC, which is a flat-rate contribution, Class 4 NIC is a percentage of your annual profits. For the tax year 2021/2022, the rate for Class 4 NIC is 9% on profits between 9,568 and 50,270, and an additional 2% on profits above 50,270.

4. Example Scenario: Calculating Class 4 NIC vs. Class 2 NIC

Let's take an example to illustrate the difference between Class 4 NIC and Class 2 NIC. Suppose you have annual profits of 40,000 as a self-employed individual. For Class 2 NIC, you would be required to pay 3.05 per week (158.60 per year) as long as your profits exceed the threshold of 6,515.

To calculate your Class 4 NIC, you would apply the rates mentioned earlier. In this case, you would pay 9% on profits between 9,568 and 40,000, which amounts to 2,821.04. Additionally, you would pay 2% on profits above 50,270, which in this scenario is zero. Therefore, your total Class 4 NIC would be 2,821.04.

5. Tips for Managing Your NIC Contributions

- Regularly review your profits: As a self-employed individual, your profits may fluctuate from year to year. It's crucial to review your profits regularly to ensure you are paying the correct amount of NIC based on the current rates and thresholds.

- Keep accurate records: Maintaining accurate financial records is essential for calculating your NIC contributions. Make sure to keep track of your income, expenses, and profits to accurately determine your liability.

6. Case Study: Managing NIC Contributions for a Freelancer

Let's consider the case of a freelance graphic designer who earns 25,000 per year. As their profits fall within the range of 9,568 to 50,270, they would be liable to pay Class 4 NIC at a rate of 9%. In this case, their Class 4 NIC would amount to 1,785.30.

However, if their profits were below the Class 4 NIC threshold of 9,568, they would not be required to pay Class 4 NIC. Instead, they would only need to pay the flat-rate Class 2 NIC of 3.05 per week.

Understanding the differences between Class 4 NIC and Class 2 NIC is crucial for self

8. Why It Matters?

4. Class 4 NIC and Your National Insurance Record: Why It Matters

1. Understanding your National Insurance contributions is crucial for anyone who is self-employed. Not only does it determine the amount you pay towards your state pension, but it also affects your entitlement to various other benefits and services. Class 4 National Insurance Contributions (NIC) play a significant role in this equation. In this section, we will delve into the importance of Class 4 NIC and its impact on your National Insurance record.

2. Class 4 NIC is a type of National Insurance contribution that self-employed individuals are required to pay on their profits above a certain threshold. It is calculated based on your annual profits and is separate from the Class 2 NIC, which is a flat rate contribution. Class 4 NIC is a percentage of your profits, and the rate varies depending on your income level.

3. One of the primary reasons why Class 4 NIC is important is that it directly affects your entitlement to the State Pension. Your National Insurance record is used to determine the number of qualifying years you have towards the State Pension. To qualify for the full State Pension, you need a minimum of 35 qualifying years. Each year you pay Class 4 NIC counts towards these qualifying years, helping you build up your pension entitlement.

4. Let's take an example to illustrate the significance of Class 4 NIC in your National Insurance record. Suppose you are self-employed and have been making Class 4 NIC contributions for the past 10 years. If you were to stop making contributions now, you would have 10 qualifying years towards your State Pension. However, if you continue to make contributions for another 25 years, you would reach the 35 qualifying years needed for the full State Pension.

5. In addition to the State Pension, your National Insurance record also affects your eligibility for various other benefits and services. For instance, it can impact your entitlement to Jobseeker's Allowance, employment and Support allowance, Maternity Allowance, and Bereavement Support Payment. Therefore, maintaining a good National Insurance record by keeping up with your Class 4 NIC contributions is essential to ensure you can access these benefits when needed.

6. Here are a few tips to help you stay on top of your Class 4 NIC contributions and maintain a healthy National Insurance record:

A. Keep accurate records of your self-employed income and expenses to calculate your profits accurately.

B. Regularly review your profits and ensure you are aware of any changes that could affect your Class 4 NIC liability.

C. Make use of online calculators and resources provided by HM Revenue and Customs (HMRC) to help you estimate your Class 4 NIC contributions.

D. Consider seeking professional advice from an accountant or tax advisor to ensure you are correctly calculating and paying your Class 4 NIC contributions.

7. Case studies can also provide valuable insights into the importance of Class 4 NIC. For instance, Jane, a self-employed graphic designer, had been neglecting her Class 4 NIC contributions for several years. When she reached retirement age, she realized she had accumulated only 20 qualifying years towards her State Pension. This meant she would receive a reduced pension amount. By understanding the significance of Class 4 NIC and seeking professional advice, Jane was able to catch up on her contributions and reach the 35 qualifying years needed for the full State Pension.

8. In conclusion, Class 4

9. Frequently Asked Questions about Class 4 NIC Contributions

1. What are Class 4 NIC contributions and who needs to pay them?

Class 4 National Insurance Contributions (NIC) are a type of tax that self-employed individuals in the UK are required to pay. If you work for yourself and earn a profit above a certain threshold, you will need to pay Class 4 NIC contributions. These contributions are used to fund various state benefits, such as the State Pension and Maternity Allowance.

For the tax year 2021/2022, you will need to pay Class 4 NIC contributions if your annual profits from self-employment are 9,568 or more. The rate of Class 4 NIC contributions is currently set at 9% on profits between 9,568 and 50,270, and 2% on profits above 50,270.

2. How do I calculate my Class 4 NIC contributions?

Calculating your Class 4 NIC contributions is relatively straightforward. You need to know your total profits from self-employment for the tax year and apply the relevant rates to the applicable profit thresholds.

Let's say your annual profits from self-employment are 30,000. To calculate your Class 4 NIC contributions, you would follow these steps:

- Calculate the amount of profits subject to the 9% rate: 30,000 - 9,568 = 20,432

- Multiply the profits subject to the 9% rate by 0.09: 20,432 x 0.09 = 1,838.88

- Calculate the amount of profits subject to the 2% rate: 30,000 - 50,270 = 0 (as your profits are below this threshold)

- Multiply the profits subject to the 2% rate by 0.02: 0 x 0.02 = 0

- Add the two amounts together: 1,838.88 + 0 = 1,838.88

In this example, your Class 4 NIC contributions for the tax year would be 1,838.88.

3. Are there any exemptions or reductions for Class 4 NIC contributions?

Yes, there are certain exemptions and reductions available for Class 4 NIC contributions. For instance, individuals who are under the State Pension age and have profits below the Small Profits Threshold (currently 6,515 for the tax year 2021/2022) are exempt from paying Class 4 NIC contributions.

Additionally, individuals who have reached the State Pension age are not required to pay Class 4 NIC contributions. Instead, they will pay Class 2 NIC contributions, which have a different set of rules and rates.

4. Can I claim back Class 4 NIC contributions if my profits decrease?

Unlike some other taxes, Class 4 NIC contributions are not directly linked to your actual profits for the tax year. Once you reach the profit thresholds, you are liable to pay Class 4 NIC contributions, regardless of any subsequent decrease in your profits.

However, if your profits for a specific tax year end up being below the Small Profits Threshold, you may be eligible to claim a refund for any Class 4 NIC contributions you have already paid. It's important to keep track of your profits and notify HM Revenue and Customs (HMRC) if your profits fall below the threshold to ensure you receive any potential refund.

5. How do I pay my Class 4 NIC contributions?

Class 4 NIC contributions are typically paid alongside your income tax through the Self Assessment process. When completing your Self Assessment tax return, you will need to report your profits from self-employment and calculate your Class 4 NIC contributions accordingly.

Once your tax return is submitted, HMRC will calculate the total amount of tax and