Not sure what National Insurance you need to pay if you’re Self-Employed? Here’s our guide to Class 2 National Insurance and Class 4 National Insurance, as well as rates and thresholds.
What is National Insurance?
National Insurance contributions (NICs) are a taxes payable on earnings of the British public. This tax is used so you can qualify for benefits, including a State Pension and other benefits/allowances.
NI is categorised as different ‘classes’ and the class you pay is derived from your employment status.
Class 1 contributions are paid by PAYE staff on greater £183 a week and under the State Pension age. These contributions are deducted by the employer.
Self-employed individuals pay NIC in two sub-classes: Class 2 and Class 4, with a few exceptions.
Self-employed National Insurance – what do I pay?
Most self-employed people pay NI via their Self Assessment tax return which is submitted every year. You pay Class 2 NICs if your profits are in excess of (or equal to) £6,475 per annum, and Class 4 NICs if your profits are equal to or greater than £9,501 per annum (details on rates and thresholds below).
But for some self-employed people, there are different rules:
you won’t pay NICs if you’re under 16, or over the state retirement age
you won’t have to pay Class 2 NICs if you’re a married woman who opted into the Reduced Rate scheme before it ended in April 1977
separate rules apply to share fishermen and voluntary development workers
Some self-employed people don’t pay National Insurance contributions through Self Assessment, but they may choose to make voluntary contributions. These workers include:
examiners, moderators, and invigilators
religious ministers, providing that they receive no salary or stipend
people who make investments, but without receiving a commission or fee, and not as a business
some people whose business involves land or property
Self-employed National Insurance rates
Class 2 and Class 4 NICs are charged at different rates.
The Class 2 National Insurance contribution is a fixed amount of £3.05 a week and it’s only charged if your annual profits are £6,475 or more.
Class 4 National Insurance contributions are only charged if your profits are above £9,500 a year. The rate is nine per cent of profits between £9,501 and £50,000 and two per cent on profits over £50,000.
What is Class 2 National Insurance?
|Class 2 NICs||2020-21||2021-22|
|Small profits threshold||£6,475||£6,515|
What is Class 4 National Insurance?
|Class 4 NICs||2020-21||2021-22|
start paying above
|A lower rate above||£50,000||£50,270|
|Rate above £50,000||2%||2%|
Voluntary self-employed National Insurance contributions
Some individuals choose to make voluntary NICs. You might do this if there are shortfalls in your “stamp” which are gaps in your National Insurance record that could affect your entitlement to the State Pension, like if you stopped working, or opted out of SERPS (beyond the scope of this article but get in touch if you think this may have happened) or if you had small profits during periods of self-employment.
If you’re concerned that there may be gaps in your National Insurance record, you should ask for a copy using the gov.uk tool. You can then check whether you’re eligible to make voluntary contributions.
National Insurance contributions – self-employed payment process
For most self-employed people, National Insurance payment is made through the Self Assessment process. You need to file your return and pay your bill by 31 January each year. For more information, read our small business guide to Self Assessment tax returns.
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