PLEASE NOTE: The charity TaxAid advises only those people on low incomes whose problems cannot be resolved with HMRC.

National Insurance for the self-employed

National Insurance

If you are self-employed you will normally pay class 2 National Insurance and class 4 National Insurance.

Class 2 National Insurance

Once you start self employment you become liable to pay Class 2 National Insurance.

Most people will pay class 2 National Insurance along with class 4 National Insurance and income tax (in January self-assessment payments). People with profits of less than the Small Profit Threshold (£5,965 for 2016/17 and 2015-16), will not have to pay any class 2 National Insurance. They will not need to claim an exemption in advance.

In some case, you may wish to voluntarily pay class 2 National Insurance. This can be done on the self-assessment tax return.

You may need to consider making a voluntary payment of class 2 National Insurance in advance, even where your profits are over the Small Profit Threshold. This is likely to apply if you want to claim Maternity Allowance before the usual self-assessment payment date for the tax year.

For 2016-17, class 2 National Insurance is due at £2.80 per week.

National Insurance is payable based on the level of your business profits. See the Gov.uk website for registering on-line at https://www.gov.uk/register-for-self-assessment#4 or contact the Newly self-employed helpline 0300 200 3504.

There are special rates of Class 2 National Insurance for share fishermen and volunteer development workers. For details see the Share Fishermen and Volunteer Development Workers pages on the HMRC website.

Do I have to pay Class 2 National Insurance?

Unless your profits from self-employment are below the threshold – the Small Profit Threshold of £5,965 for 2016/17 and 2015/16, or the ‘small earnings exception’ level for earlier years (£5,885 for 2014-15;) – you will have to pay Class 2 National Insurance.

Even when you do not have to pay class 2 National Insurance,  you may wish to pay Class 2 anyway in order to preserve your pension entitlement and entitlement to certain other State Benefits. If your profits are over the small earnings exception level / Small Profit Threshold, you must pay Class 2 National Insurance.

Class 4 National Insurance

If your taxable profits are above the lower Class 4 profit limit (£8,060 for 2016-17 and 2015-16) you will pay Class 4 contributions of 9% on profits over this limit. You pay Class 4 National Insurance together with your income tax – usually due by 31 January and 31 July each tax year. If profits are high (over £43,000 in 2016-17; £42,385 in 2015-16) then the rate of Class 4 National Insurance falls to 2% on profits over this higher limit.