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Employed and self employed people pay different types of National Insurance contributions.
Employees pay Class 1 National Insurance contributions, which are deducted from your
their salary as an employee.
As a self-employed person you will pay the Class 2 contribution, which is currently around £2.40 a week.
You should register with HM Revenue and Customs to pay Class 2 National Insurance contributions as soon as you start in business - or obtain a small earnings exception certificate.
You will be encouraged to set up a direct debit to pay quarterly.
You may register via the Newly Self-employed Helpline (0845 915 4515) or on-line at
http://www.hmrc.gov.uk/selfemployed/iwtregister-as-self-employed.htm
In addition, if your taxable profits are above a certain figure you will pay Class 4 contributions.
These in effect are an addition to your tax bill. You pay them together with your income tax
to HM Revenue and Customs.
If your profits are below the threshold for the 'small earnings exception' you do not have to
pay Class 2 National Insurance. You must ask the Revenue to send you a certificate to confirm
that you qualify for this exception. However, you may wish to pay Class 2 anyway, in order
to preserve your pension entitlement and certain other State Benefits.
To check the current rates of National Insurance go to the Rates and Allowances section.
For more information on taxation of
businesses see How the tax system works.
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