Skip navigation |

What National Insurance do I pay if I am self-employed?

If you are self-employed you will have to pay National Insurance contributions (NIC). In this section we explain NIC issues that you might come across.

What National Insurance do I pay on self-employed income?
How do I register for Class 2 and 4 NIC?
How do I know how much to pay?
So how much Class 4 NIC do I pay?
What is the Small Profit Threshold?
I have a Small Earnings Exception (SEE) certificate which covers the 2015/16 tax year. What do I need to do?

What should I do if I have overpaid Class 2 NIC contributions?
How do I know if I am entitled to pay reduced rate contributions?
I am employed and self-employed. Do I still need to pay Class 2 NIC?
I am employed and self-employed. Do I still need to pay Class 4 NIC?
What is deferment?
What state benefits does payment of Class 2 NIC entitle me to?
Why might I choose to pay Class 2 NIC even if my earnings are below the Small Profit Threshold?
Why might I choose to pay Class 2 NIC even though I could be exempt because I am entitled to pay reduced rate contributions?
How and when do I pay my Class 2 and Class 4 NIC?


What National Insurance do I pay on self-employed income?

Remember that you only pay National Insurance contributions (NIC) between the ages of 16 and state retirement age. You can find out your state pension age by using the calculator on GOV.UK.

You pay two different classes of NIC if you are self-employed – Class 2 and Class 4. If you are a married woman or widow, who is entitled to pay reduced rate contributions, you do not need to pay Class 2 NI. There are special rules relating to share fishermen and volunteer development workers, which you can read about on the HM Revenue & Customs' (HMRC) website.

Back to the top

How do I register for Class 2 and 4 NIC?

You will register with HMRC as self-employed which will register you for national insurance purposes as well. You can find out about registration on our ‘how do I register as self-employed’ page.

Back to the top

How do I know how much to pay?

Class 2 NIC are a fixed weekly amount – £2.80 per week for 2015/16, assuming your profits are above the small profits threshold. Class 4 NIC are based on the level of your self-employed profits.

Back to the top

So how much Class 4 NIC do I pay?

You pay Class 4 NIC on your taxable self-employed profits. The NIC is paid in profit bands as follows (figures shown for 2015/16):

Profit band Class 4 NI
Up to £8,060 nil
£8,060 up to £42,385 9%
Over £42,385 2%


Example

Frank has profits of £10,000 for the tax year 2015/16. His Class 4 NIC liability is calculated as follows:

First £78,060 @ 0% nil
On next £1,940 @ 9% £174.60
Total due £174.60


Example

Henriette has profits of £50,000 for the tax year 2015/16. Her Class 4 NIC liability is calculated as follows:

First £8,060 @ 0% nil
Next £34,325 @ 9% £3,089.25
£7,615 @ 2% £152.30
Total due £3,241.55


Back to the top

What is the Small Profit Threshold?

This relates to liability for Class 2 NIC. If your self-employed earnings for the 2015/16 tax year are less than £5,965, then you do not need to pay Class 2 NIC. Before 6 April 2015 you could apply in advance for a Small Earnings Exception certificate that exempted you from paying Class 2 NI contributions. This certificate may only be made in advance or backdated for a maximum of 13 weeks.

For the 2015/16 tax year onwards Class 2 NIC will be calculated as part of the self assessment process and will be due at the same time as your income tax and Class 4 NIC.

Back to the top

I have a Small Earnings Exception (SEE) certificate which covers the 2015/16 tax year. What do I need to do?

HMRC should have written to you explaining that your SEE certificate will be cancelled from 11 April 2015 and that your Class 2 NIC will now be calculated as part of the self assessment process.

If you have profits from self employment which are less than the small profits threshold (£5,965 for 2015/16) then there will be no class 2 NIC due.

What should I do if I have overpaid Class 2 NIC contributions

For the 2014/15 tax year it may have been the case that you paid Class 2 NIC and then applied for a Small Earnings Exception certificate. If you have already paid Class 2 NIC incorrectly then you can reclaim them after the end of the tax year.

To do this complete form CA 8480, but beware, it needs to be with HMRC by 31 January following the end of the tax year that you are making the claim for. For example, a claim for overpaid Class 2 NIC for 2014/15, needs to be with HMRC by 31 January 2016. You need to accompany the form with evidence of your earnings for that year.

Back to the top

How do I know if I am entitled to pay reduced rate contributions?

Married women could apply for a reduced rate of contributions before 1977. A subsequent annulment of marriage, or divorce, immediately stops entitlement to paying reduced contributions. If you are not sure whether or not you are entitled to pay at the reduced rate you can apply on form CF9 (married women) or form CF9A (widows) to find out. The same forms are used to give up your right to pay reduced rate contributions.

Back to the top

I am employed and self-employed. Do I still need to pay Class 2 NIC?

In general, the answer is "yes". But if you pay the maximum amount of Class 1 NIC, you may not need to pay any more. For the 2015/16 tax year your Class 2 NIC liability will be automatically calculated and included with the tax you are due to pay on 31 January 2017.

Back to the top

I am employed and self-employed. Do I still need to pay Class 4 NIC?

In general, the answer is “yes”. But if you pay the maximum amount of annual NIC by way of Class 1 and Class 2, you may not need to pay the full amount of Class 4 NIC. In that case you could apply for deferment. In any case you will have to pay 2% Class 4 NIC on all profits above the level of £8,060 (2015/16 rate).

Back to the top

What is deferment?

This a way of deferring (that is delaying) payment of ClaClass 4 NIC liabilities. If you do this, your total NIC liability is reviewed at the year end and any additional NIC due is then collected. You apply for deferment before the start of the tax year on form CA72B.

Back to the top

What state benefits does payment of Class 2 NIC entitle me to?

Class 2 gives entitlement to:

  • Basic state pension
  • Contribution based employment and support allowance
  • Maternity allowance
  • Certain bereavement benefits

It does not give entitlement to additional state pension or contribution based jobseeker’s allowance (although there are exceptions for share fishermen and volunteer development workers employed abroad).

Class 4 NIC do not count towards any state benefits.

In order to claim these benefits, certain amounts of Class 2 NIC will have had to be paid. You can find further details at GOV.UK.

Back to the top

Why might I choose to pay Class 2 NIC even if my earnings are below the Small Profits Threshold?

You might want to protect your eligibility to certain state benefits. If this is the case, we understand that you can request to pay Class 2 NIC when completing your 2015/16 self assessment tax return.

Back to the top

Why might I choose to pay Class 2 NIC even though I could be exempt because I am entitled to pay reduced rate contributions?

You might want to protect your eligibility to certain state benefits. If this is the case, we understand that you can request to pay Class 2 NIC when completing your 2015/16 self assessment tax return.

Back to the top

How and when do I pay my Class 2 and Class 4 NIC?

For the 2015/16 tax year onwards both Class 2 and Class 4 NIC is paid along with your income tax liabilities.

Up until the 2015/16 tax year, Class 2 NIC was paid either monthly by direct debit, 6 – monthly by direct debit or 6 – monthly by payment of a bill issued by HMRC. In both of these latter cases payments are due in January and July. You chose the payment method.

Back to the top

[Admin]

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on the Low Incomes Tax Reform Group of the Chartered Institute of Taxation is a registered charity (number 1037771) website. To find out more about the cookies, see our privacy policy.