NIC for the self-employed
If you are self-employed you may have to pay National Insurance contributions (NIC). On this page, we explain NIC issues that you might come across. For more general information on NIC visit our National Insurance page. 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, see our National Insurance numbers page.
Content on this page:
Self-employed income includes not only income that we might traditionally think of as self-employed income, but also might relate to income from any business activity, even if that might alternatively be considered an investment activity. For example, in rare cases, this might include income from property letting (see GOV.UK) or from cryptoassets.
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.
For 2023/24, 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 under the heading Comparison of Class 2 and Class 4, 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 – see under the heading Reduced rate contributions for more information. 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.
Registering for Class 2 and Class 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 Self-employment: registering for tax and NIC.
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.
Class 2 NIC amounts
There is a summary of the differences between Class 2 and Class 4 NIC, including how much and when you make payments, under the heading Comparison of Class 2 and Class 4 below.
Class 2 NIC are a fixed weekly amount – £3.45 per week for 2023/24 (£3.15 per week for the 2022/23 tax year) if you have made sufficient profits (see below for more details).
The rules for Class 2 NIC changed from 2022/23. Prior to the 2022/23 tax year, you needed to pay Class 2 NIC if your taxable self-employed profits were above the ‘small profits threshold’. We explain this further under the heading Small profits threshold below.
For 2022/23 and 2023/24, if your taxable self-employed profits are:
- above the lower profits limit, you must usually pay Class 2 NIC. The lower profits limit is £12,570 in 2023/24 and was £11,908 in 2022/23. For 2023/24, the lower profits limit is the same amount as the personal allowance for income tax. See the heading Lower profits limit below for more information.
- below the small profits threshold (£6,725 in 2022/23 and 2023/24), then you can choose to pay voluntary Class 2 NIC, this is discussed under the heading Voluntary Class 2 NIC below.
- 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 payments. 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.
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 ends on 8 April).
Small profits threshold
This relates to Class 2 NIC. If your self-employed profits for the 2023/24 tax year are less than £6,725 (the small profits threshold, which was also £6,725 for the 2022/23 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. This is explained in more detail under the heading Voluntary Class 2 NIC, below.
For 2022/23 and 2023/24, if your profits exceed the small profits threshold but not the lower profits limit (see the lower profits limit heading below), you will be treated as having made Class 2 NIC without needing to pay anything.
Under the heading Voluntary Class 2 NIC below, we explain some considerations if you are thinking of reducing your self-employment work to below the small profits threshold.
Class 4 NIC amounts
Class 4 NIC is based on the level of your taxable self-employed profits. You are only liable to pay Class 4 NIC if your profits are over the lower profits limit. This is £12,570 for 2023/24 (£11,908 for the 2022/23 tax year). See the heading Lower profits limit below for more information.
The NIC is paid in profit bands as follows (figures shown for 2023/24, for earlier tax years see tax and NIC rates and bands):
Class 4 NIC
|Up to £12,570 (lower profits limit)
|£12,570 up to £50,270
|Over £50,270 (upper profits limit)
Lower profits limit
For the 2022/23 and 2023/24 tax years, this relates to both Class 2 and Class 4 NIC.
The lower profits limit is £12,570 for 2023/24 (£11,908 for 2022/23).
If your self-employed profits for the 2023/24 tax year are less than £12,570 then you do not need to pay any Class 2 NIC or Class 4 NIC.
From 2022/23, 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 you are treated as having made them.
Paying Class 2 and Class 4 NIC
Class 2 NIC and Class 4 NIC are calculated and paid along with income tax due, 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 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 under the heading Maternity allowance below.
If you prefer, you can make regular payments of Class 2 NIC throughout the tax year, rather than a lump sum payment. This is called a budget payment plan.
Comparison of Class 2 and Class 4
The headings below show the main points on Class 2 and Class 4 NIC. All rates and thresholds are for the 2023/24 tax year (see tax and NIC rates and bands for earlier tax years).
Class 2 NIC
£3.45 per week for each week you are self-employed, if your profits exceed the lower profits limit in that tax year.
- Minimum profit level
You do not have to pay Class 2 if your self-employed profits are below the small profits threshold of £6,725 (see under the heading Small profits threshold above for more information). If your profits are between £6,725 and £12,570 then you are treated as making Class 2 contributions even though you do not pay any Class 2 NIC.
- Maximum profit level
If you are employed and self-employed and you pay the maximum amount of employee NIC (Class 1), then you may not need to pay Class 2.
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.
- How to pay
It is usually paid as part of your self assessment tax.
Class 4 NIC
Calculated as 9% on self-employment profits above the lower profits limit, and at 2% above an upper limit (see below for an exception when there is a maximum level of profits).
- Minimum profit level
You only pay Class 4 NIC on profits above the lower profits limit (£12,570 for 2023/24).
- Maximum profit level
If you have self-employed profits above the upper profits limit (£50,270 for 2023/24) you will pay Class 4 NIC on profits above that limit at a rate of 2%. If you are employed and self-employed and you pay the maximum amount of employee NIC (Class 1) then you may only need to pay Class 4 on profits above £12,570 at a rate of 2%.
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 to pay
It is paid as part of your self assessment tax.
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 HMRC’s 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.
Employed and self-employed
Class 2 NIC
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). 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.
Class 4 NIC
Usually, you will still need to pay Class 4 NIC if you are employed and self-employed.
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 2% Class 4 NIC on all profits above the level of £12,570 (for 2023/24). 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.
You can find details of the benefits to which Class 2 gives entitlement on our National Insurance page.
Class 4 NIC do not count towards any state benefits.
Voluntary Class 2 NIC
You might choose to pay Class 2 NIC even if:
- your earnings are below the small profits threshold (as explained under the heading Small profits threshold above), or
- you are exempt from paying Class 2 because you are entitled to reduced rate contributions (as discussed under the heading Reduced rate contributions above).
This is because you may want to protect your eligibility to certain state benefits. 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). See the headings below on Maternity allowance and Contributions-based employment and support allowance for more information.
If this is the case, you should contact HMRC and make arrangements to pay the Class 2 NIC before the self assessment deadline.
The state pension also depends on you having paid or been credited with sufficient NIC over your working life.
If you usually make self-employed profits above the small profits threshold but are considering reducing your working hours then you should consider whether you already have enough qualifying years for National Insurance for the state pension, by checking your National Insurance record. If you do not have the required 35 qualifying years for a full state pension, then you should consider whether the reduced level of your self-employment profits will still mean you are paying (or deemed to be paying) National Insurance.
Alternatively, if you are in a position where you might qualify for a National Insurance credit, then you still may continue to obtain qualifying years for National Insurance purposes.
If neither of the above apply, you could consider making voluntary contributions for the year. However, before doing so, it is always recommended that you contact the Future Pension Centre for further information.
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.
If you are self-employed then there are different amounts of maternity allowance depending on the number of weeks you have paid Class 2 NIC. These are explained on GOV.UK.
For example, if your baby was due in August 2023, then you would have had to pay sufficient contributions in the 66 weeks leading up to that date – broadly from May 2022 to August 2023. Payment of your Class 2 NIC for the tax year 2022/23 is not due until 31 January 2024, 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 2024, 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 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 should 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.
Contribution-based employment and support allowance
Contribution-based employment and support allowance (ESA) is paid to people who are unable to work due to illness. Usually, 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.
For example, to claim ESA in December 2023, you must have paid at least 26 weekly contributions in either of the two tax years 2020/21 and 2021/22. In addition, you must have paid or been credited with 50 weekly contributions for both of those tax years.
You should note that there are some exceptions to the above contributions conditions for ESA, there is more information on the conditions to claim ESA from entitledto.