40.—(1) The amount to be deducted in respect of income tax under regulation 39(1)(b)(i), (2)(b)(i) or (8)(a)(i) (calculation of net profit of self-employed earners) shall be calculated on the basis of the amount of chargeable income and as if that income were assessable to income tax at F1... the basic rate of tax applicable to the assessment period less only the personal relief to which the claimant is entitled under sections 257(1) of the Income and Corporation Taxes Act 1988 F2 (personal allowance) as is appropriate to his circumstances; but, if the assessment period is less than a year, the earnings to which the [F3[F4basic] rate] of tax is to be applied and the amount of the personal reliefs deductible under this paragraph shall be calculated on a pro rata basis.
(2) The amount to be deducted in respect of [F5national insurance contributions] under regulation 39(1)(b)(i), (2)(b)(ii) or (8)(a)(ii) shall be the total of—
(a)the amount of Class 2 contributions payable under section 11(1) or, as the case may be, 11(3) of the Act at the rate applicable to the assessment period except where the claimant's chargeable income is less than the amount specified in section 11(4) of the Act (small earnings exception) for the tax year applicable to the assessment period; but if the assessment period is less than a year, the amount specified for that tax year shall be reduced pro rata; and
(b)the amount of Class 4 contributions (if any) which would be payable under section 15 of the Act (Class 4 contributions recoverable under the Income Tax Acts) at the percentage rate applicable to the assessment period on so much of the chargeable income as exceeds the lower limit but does not exceed the upper limit of profits and gains applicable for the tax year applicable to the assessment period; but if the assessment period is less than a year, those limits shall be reduced pro rata.
(3) In this regulation “chargeable income” means—
(a)except where sub-paragraph (b) applies, the earnings derived from the employment less any expenses deducted under paragraph (2)(a) or, as the case may be, (3) of regulation 39;
(b)in the case of employment as a child minder, one-third of the earnings of that employment.
Textual Amendments
F1Words in reg. 40(1) omitted (6.4.2009) by virtue of The Social Security (Miscellaneous Amendments) Regulations 2009 (S.I. 2009/583), regs. 1(2), 7(6)(a)
F2 1988 c. 1; sections 257 and 257A were substituted by the Finance Act 1988 (c. 39), section 33.
F3Words in reg. 40(1) substituted (1.10.2007) by The Social Security (Miscellaneous Amendments) (No. 5) Regulations 2007 (S.I. 2007/2618), regs. 1(1), 12(5)
F4Word in reg. 40(1) substituted (6.4.2009) by The Social Security (Miscellaneous Amendments) Regulations 2009 (S.I. 2009/583), regs. 1(2), 7(6)(b)
F5Words in reg. 40(2) substituted (1.4.2014 for specified purposes, 7.4.2014 in so far as not already in force) by The Housing Benefit (Miscellaneous Amendments) Regulations 2014 (S.I. 2014/213), regs. 1(3), 4(3)(c)