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

Updated on 13 April 2022

Self-employment

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

Illustration of a man and woman next to a clipboard about National Insurance

For more general information on NIC visit What is National Insurance?. If you want information on how to get a National Insurance number (NINO) or what to do if you have lost or forgotten your NINO, visit our National Insurance number page.

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

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.

If you are above state pension age, you might be required to pay the new Health and Social Care Levy on your self-employment profits from 6 April 2023.

Currently, you pay two different classes of NIC if you are self-employed and earning sufficient profits: Class 2 and Class 4. These different classes are summarised in the table below. If you are a married woman or widow and you are entitled to pay reduced rate contributions, you do not need to pay Class 2 NIC. There are also special rules relating to share fishermen, volunteer development workers, and those engaged as examiners and exam markers which you can read about on GOV.UK.

What is self-employed income for Class 2 NIC purposes?

This includes not only income that we might traditionally think of as self-employed income, but also anyone carrying on a business activity – even if that might be considered to be an investment activity like property letting. Do note, though, that we are talking about a business activity. It is unlikely that letting a single property would amount to a business activity.

How do I register for Class 2 and 4 NIC?

When you register with HMRC as self-employed, the registration covers both income tax and National Insurance. You can find out about registration at How do I register for tax and National Insurance?. If you do not register your self-employment with HMRC then any Class 2 NIC payments may be rejected by HMRC, or Class 2 NIC payments you are treated as having made may not be recorded. It is not sufficient to state on your tax return that you have started self-employment. Instead, you need to follow HMRC’s registration process for the self-employed even if you are already completing Self Assessment tax returns for other reasons.

How do I know how much to pay?

The table below summarises the differences between Class 2 and Class 4 NIC, including how much and when you make payments. Class 2 NIC are a fixed weekly amount – £3.15 per week for 2022/23 (£3.05 per week for the 2021/22 tax year) if you have made sufficient profits (see below).

The rules for Class 2 NIC have changed for the 2022/23 tax year onwards.

Prior to the 2022/23 tax year you needed to pay Class 2 NIC if your profits were above the Small Profits Threshold, which was £6,515 in the 2021/22 tax year.

For 2022/23 onwards, you pay Class 2 NIC if your profits are above the Lower Profits Limit,(which is £11,908 in 2022/23). If your profits are below the Small Profits Threshold (£6,725 in 2022/23) then you can choose to pay voluntary Class 2 NIC. If your profits from self-employment are between the Small Profits Threshold and the Lower Profits Limit then there is no Class 2 NIC to pay – instead you will be treated as making Class 2 NIC. This will mean you will be able to access entitlement to contributory benefits in the same way as if you had paid Class 2 NIC.

For 2023/24 onwards, the Lower Profits Limit will be the same amount as the personal allowance for income tax.

The amount of Class 2 NIC due is based on the number of weeks in which you are self-employed in the tax year. A week runs from a Sunday to Saturday. If a contribution week straddles two tax years, it is treated as falling in the earlier year.

For example, if your self-employment began on 5 February 2023 you should pay 9 weeks’ Class 2 NIC for 2022/23, that is, 9 x £3.15 = £28.35 as there are 9 weeks between 5 February 2023 and 5 April 2023 (that contribution week actually ends on 8 April).

Class 4 NIC are based on the level of your self-employed profits. You are only liable to pay Class 4 NIC if your profits are over the Lower Profits Limit. This is £11,908 for 2022/23 (£9,568 for the 2021/22 tax year).

So how much Class 4 NIC do I pay?

You pay Class 4 NIC on your taxable self-employed profits (on the same basis as for Class 2 NIC above). The NIC is paid in profit bands as follows (figures shown for 2022/23):

Profit band

Class 4 NIC

Up to £11,908

nil

£11,908 up to £50,270

10.25%

Over £50,270

3.25%

The Class 4 NIC rates have been increased by 1.25% from the 2021/22 tax year (so from 9% to 10.25%, and 2% to 3.25%) in advance of the new Health and Social Care Levy. From 2023/24 this will be a separate levy, but for 2022/23 it will be introduced by temporarily increasing the rates of Class 1 (for employers and employees) and Class 4 NIC.

Example

Frank has profits of £13,000 for the tax year 2022/23. His Class 4 NIC liability is calculated as follows:

First £11,908 @ 0%

nil

On next £1,092 @ 10.25%

£111.93

Total due

£111.93

Example

Henriette has profits of £55,000 for the tax year 2022/23. Her Class 4 NIC liability is calculated as follows:

First £11,908 @ 0%

nil

Next £38,362 @ 10.25%

£3,932.10

£4,730 @ 3.25%

£153.72

Total due

£4,085.82

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

Class 2 NIC and Class 4 NIC are calculated and paid along with income tax liabilities, through the Self Assessment system. If you make payments on account then your Class 4 NIC will be included when calculating the instalments. If you do not pay your tax through payments on account then the Class 4 NIC will be due on 31 January following the end of the tax year to which it relates. Class 2 NIC is paid as part of the payment due on 31 January following the end of tax year, regardless of whether or not you make payments on account.

If you have to rely on Class 2 NIC for entitlement of certain benefits, for example Maternity Allowance, you may need to pay your Class 2 NIC before the Self Assessment deadline. We explain why below.

If you prefer, you can make regular payments of Class 2 NIC throughout the tax year, rather than a lump sum payment. You should contact HMRC to arrange this.

How do Class 2 and Class 4 NIC compare?

The table below shows the main points on Class 2 and Class 4 NIC; all rates and thresholds are for the 2022/23 tax year.

 

Class 2

Class 4

How much do you pay?

£3.15 per week for each week you are self-employed, if your profits exceed the Lower Profits Limit in that tax year.

Calculated as 10.25% on self-employment profits above the Lower Profits Limit, and at 2% above an upper limit (see below for an exception).

Is there a minimum level of profits before you pay NIC?

Yes, you do not have to pay Class 2 if your self-employed profits are below the Small Profits Threshold of £6,725 (see the section below).

If your profits are between £6,725 and £11,908 then you are treated as making Class 2 contributions even though you do not pay any Class 2 NIC.

Yes, you only pay Class 4 NIC on profits above £11,908.

Is there a maximum level of profits when you stop paying NIC?

If you are employed and self-employed and you pay the maximum amount of employees NIC (Class 1) then you may not need to pay Class 2.

If you have self-employed profits above £50,270 you will pay Class 4 NIC on profits above £50,270 at a rate of 3.25%.

If you are employed and self-employed and you pay the maximum amount of employees NIC (Class 1) then you may only need to pay Class 4 on profits above £11,908 at a rate of 3.25%.

When is it paid?

It is due by the 31 January following the end of the tax year as part of the Self Assessment process. It is not included in any payments on account. There are special arrangements in place for Class 2 NIC, due on 31 January 2022, that are part of a Time to Pay Arrangement. You can read about this in our news article

It is paid as part of the Self Assessment process, so payment may be due as part of any payments on account or by 31 January following the end of the tax year if you are not within the scope of payments on account.

How do you pay it?

It is paid as part of your Self Assessment tax.

It is paid as part of your Self Assessment tax.

What is the Small Profits Threshold?

This relates to Class 2 NIC. If your self-employed profits for the 2022/23 tax year are less than £6,725 (the Small Profits Threshold) (£6,515 for the 2021/22 tax year), then you do not need to pay Class 2 NIC. You will however have the option to pay Class 2 NIC voluntarily at the end of the tax year.

For 2022/23 onwards, if your profits exceed the Small Profits Threshold but not the Lower Profits Limit, you will be treated as having made Class 2 NIC without needing to pay anything.

What is the Lower Profits Limit?

For the 2022/23 tax year onwards, this relates to both Class 2 and Class 4 NIC.

The Lower Profits Limit is £11,908 for the 2022/23 tax year. This means that if your self-employed profits for the 2022/23 tax year are less than £11,908 then you do not pay any Class 2 NIC or Class 4 NIC.

If your profits from self-employment are between the Small Profits Threshold and the Lower Profits Limit, then you do not pay Class 2 NIC but are treated as making Class 2 contributions.

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 enquire 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.

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 on your employment income, you may not need to pay any more contributions. Your Class 2 NIC liability is automatically calculated as part of the Self Assessment process, provided that you either file online or your paper tax return is submitted by the due date (normally 31 October, following the end of the tax year) and if you are due to pay any Class 2 NIC it is included with the tax you are due to pay on 31 January following the end of the tax year to which it relates.

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 contributions, you may not need to pay the full amount of Class 4 NIC. If this is the case then you will have to pay 3.25% Class 4 NIC on all profits above the level of £11,908 (2022/23 rate). Your Class 4 NIC liability will be automatically calculated, provided that you either file online or your paper tax return is submitted by the due date (normally 31 October, following the end of the tax year), as part of the Self Assessment process.

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

You can find details of the benefits to which Class 2 gives entitlement in the tax basics section.

Class 4 NIC do not count towards any state benefits.

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. This is because eligibility for some state benefits relies on you having paid a certain amount of Class 2 NIC within a defined time. The two benefits most likely to be affected are maternity allowance and in some specific circumstances, contributions based employment and support allowance (ESA).

If this is the case, you should contact HMRC and make arrangements to pay the Class 2 NIC early, before the Self Assessment deadline.

The state pension also depends on you having paid or been credited with sufficient NIC over your working life. You can read more about eligibility for the state pension in our pensioners section.

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. This is because eligibility for some state benefits relies on you having paid a certain amount of Class 2 NIC within a defined time. The two benefits most likely to be affected are maternity allowance and in some specific circumstances, contributions-based employment and support allowance (ESA).

If this is the case, you should contact HMRC and make arrangements to pay the Class 2 NIC early.

The state pension also depends on you having paid or been credited with sufficient NIC over your working life. You can read more about eligibility for the state pension in our pensioners section.

How does the payment of Class 2 NIC affect entitlement to maternity allowance?

Entitlement to maternity allowance is based on NIC paid in the 66 weeks before the baby is due. This period is known as the test period.

There are two levels of maternity allowance:

  1. The standard rate for which you must be self-employed for 26 weeks in that test period and have paid Class 2 NIC for 13 of them; and
  2. The lower rate for which you must be self-employed for at least 26 weeks in that test period and have earnings of at least £30 per week on average.

As an example, if your baby was due in August 2022, then you would have had to pay sufficient contributions in the 66 weeks leading up to that date – broadly from May 2021 to August 2022. Payment of your Class 2 NIC for the tax year 2021/22 is not due until 31 January 2023, so these contributions would not have been paid at the time you make a claim for Maternity Allowance.

Although the Class 2 contributions are not due until 31 January 2023, you can choose to pay them early. Paying early contributions may mean you will have paid enough to receive standard rate of maternity allowance. You can contact HMRC on 0300 200 3822 for help with this.

If you have not paid your contributions early or have not paid enough, when you make the claim for maternity allowance, you will be given the opportunity to make a lump sum payment of Class 2 contributions to enable you to claim the standard rate maternity allowance if appropriate – HMRC will work out how many weeks contributions need to be paid and then issue a bill for this amount.

How does the payment of Class 2 NIC affect entitlement to contributions-based employment and support allowance (ESA)?

ESA is paid to people who are unable to work due to illness. Normally, in order to be paid ESA in the current benefit year (which runs from January to December) you must have paid the following National Insurance contributions:

  • In one of the previous two complete tax years before the benefits year, you must have paid 26 weekly contributions; AND
  • In both of those two previous complete tax years, you must have paid or been credited with 50 weekly contributions.

As an example, in order to claim ESA in December 2022, you must have paid at least 26 weekly contributions in either of the two tax years 2019/20 and 2020/21. In addition, you must have paid or been credited with 50 weekly contributions for both of those tax years.

Usually this issue is only likely to affect you if you claim ESA between the first Sunday in January and 31 January in a year because only at that time are you unlikely to have paid the contributions necessary. However, because of the coronavirus pandemic you may have entered a Time To Pay arrangement. If this is the case then contact HMRC on 0300 200 3822 for help as soon as possible.

It is important that you pay your NIC early so that your claim is not delayed, if you need to.

You should note that there are some exceptions to the above contributions conditions for ESA but the information here covers most situations.

What if I am self-employed and I work internationally?

We suggest you read our separate guidance.

Where can I find more information?

You can find more information on Class 2 National Insurance and Class 4 National Insurance in the National Insurance Manual produced by HMRC.

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