National Insurance for Self-Employed: Rates and How It Works
Learn how Class 2 and Class 4 National Insurance work for the self-employed. See current rates, thresholds, and how to pay NIC through Self Assessment.
Key Actions
- Check your profits against the Class 4 Lower Profits Limit (£12,570) to see if NIC is due
- Verify your National Insurance record on GOV.UK to check for gaps in qualifying years
- Consider paying voluntary Class 2 if your profits are below the Small Profits Threshold
- Factor Class 4 NIC into your tax savings alongside Income Tax
- Set aside 25-30% of profits to cover both Income Tax and National Insurance
National Insurance contributions (NIC) for the self-employed are one of the costs that catches new sole traders off guard. Unlike employees, where NIC is deducted from each payslip, self-employed people pay National Insurance through Self Assessment — and the rules work differently.
This guide explains the two classes of NIC that affect self-employed people, the current rates and thresholds, how payments work, and what changed from April 2024 onwards. If you're just starting out, you may also want to read about registering for Self Assessment.
How National Insurance Works for the Self-Employed
National Insurance for the self-employed is a compulsory contribution calculated on your trading profits and paid through Self Assessment. Self-employed people in the UK deal with two classes of National Insurance:
- Class 2 NIC — a flat weekly amount linked to state pension and benefit entitlement
- Class 4 NIC — a percentage of your annual profits, calculated alongside your Income Tax
Class 4 is the larger cost for most people. Class 2 has been significantly simplified since April 2024, when mandatory payments were removed.
Both classes are calculated and collected through your Self Assessment tax return — there's no separate payment process.
Class 4 NIC Rates and Calculation
Class 4 National Insurance is the main NIC charge for self-employed people, calculated as a percentage of your annual profits. It works similarly to Income Tax, with a Lower Profits Limit below which you pay nothing and different rates above certain thresholds.
Class 4 Rates and Thresholds (2025/26)
| Profit range | Rate |
|---|---|
| Below £12,570 (Lower Profits Limit) | 0% — no Class 4 due |
| £12,570 to £50,270 | 6% |
| Above £50,270 (Upper Profits Limit) | 2% |
These rates and thresholds are the same for 2024/25, 2025/26, and 2026/27. The Lower Profits Limit is aligned with the Income Tax personal allowance, so if you earn below £12,570, you pay neither Income Tax nor Class 4 NIC.
Example: Sarah is a freelance designer with £35,000 profit in the 2025/26 tax year.
- Profits between £12,570 and £35,000 = £22,430
- Class 4 NIC: £22,430 × 6% = £1,345.80
Example: James is a self-employed consultant with £65,000 profit in the 2025/26 tax year.
- Profits between £12,570 and £50,270 = £37,700 × 6% = £2,262
- Profits above £50,270 = £14,730 × 2% = £294.60
- Total Class 4 NIC: £2,556.60
Recent Rate Changes
The Class 4 main rate was cut significantly in recent years:
| Period | Main rate | Additional rate |
|---|---|---|
| 2023/24 (6 Apr 2023 – 5 Jan 2024) | 9% | 2% |
| 2023/24 (6 Jan 2024 – 5 Apr 2024) | 8% | 2% |
| 2024/25 onwards | 6% | 2% |
The rate dropped from 9% to 8% partway through 2023/24 (from 6 January 2024), then fell again to 6% from April 2024. Self-employed people now pay considerably less Class 4 NIC than before these cuts.
Important: Class 4 NIC does not count towards your state pension or any benefit entitlement. It is essentially a tax on self-employed profits. State pension credits come from Class 2 instead.
Class 2 NIC: Voluntary Contributions and State Pension
Class 2 National Insurance is a flat-rate weekly contribution that gives self-employed people entitlement to the State Pension and certain other benefits.
What Changed from April 2024
Before April 2024, self-employed people with profits above the Small Profits Threshold were required to pay Class 2 NIC. From 6 April 2024, mandatory Class 2 was removed:
- If your profits are above the Small Profits Threshold, you are automatically treated as having paid Class 2. You get the state pension credit without paying anything.
- If your profits are below the Small Profits Threshold, you receive no automatic credit. You can choose to pay voluntary Class 2 to build your pension record.
This means most self-employed people no longer pay Class 2 at all — the benefit credit happens automatically.
Class 2 Rates and Thresholds
| Tax year | Voluntary weekly rate | Annual cost | Small Profits Threshold |
|---|---|---|---|
| 2024/25 | £3.45 | £179.40 | £6,725 |
| 2025/26 | £3.50 | £182.00 | £6,845 |
| 2026/27 | £3.65 | £189.80 | £7,105 |
What Class 2 Provides
Paying (or being treated as having paid) Class 2 NIC gives you entitlement to:
- State Pension — you need 35 qualifying years for the full amount (£230.25 per week in 2025/26)
- Maternity Allowance — requires Class 2 for 13 of the 66 weeks before the due date
- Contributory Employment and Support Allowance (ESA) — support if you're unable to work due to illness
Class 2 is significantly cheaper than the alternative voluntary Class 3 (£17.45 per week in 2025/26) and provides broader benefit entitlement. If you have a choice between the two, Class 2 is generally better value.
When to Pay Voluntary Class 2 NIC
You may want to pay voluntary Class 2 NIC if:
- Your self-employed profits are below the Small Profits Threshold (£6,845 in 2025/26)
- You have gaps in your National Insurance record that could affect your State Pension
- You need Maternity Allowance entitlement and your profits are low
- You're in the early stages of building your business and profits are minimal
At £3.50 per week (2025/26), voluntary Class 2 costs £182 for a full year of state pension credit — one of the cheapest ways to build your pension record.
Check your record: You can view your National Insurance record on GOV.UK to see how many qualifying years you have and identify any gaps.
You can also backfill gaps by paying voluntary contributions for up to 6 previous tax years.
How Self-Employed National Insurance Is Paid
Both Class 2 and Class 4 NIC are collected through Self Assessment, but they're handled slightly differently:
| Class 4 NIC | Voluntary Class 2 NIC | |
|---|---|---|
| Calculated on | Annual profits | Flat weekly rate |
| Included in payments on account | Yes | No |
| When paid | 31 January and 31 July (via payments on account) | 31 January balancing payment only |
| Appears on | Self Assessment tax calculation | Self Assessment tax calculation |
Practical impact: When you budget for your tax bill, remember that Class 4 NIC is included in your payments on account. If you owe more than £1,000 in total tax and Class 4 NIC, HMRC will ask you to make advance payments towards the following year.
How to Calculate Your Total NIC Bill
Here's how to estimate your combined National Insurance liability for the 2025/26 tax year:
Example: Tom is a self-employed electrician earning £42,000 profit.
Class 4 NIC:
- Profits between £12,570 and £42,000 = £29,430
- £29,430 × 6% = £1,765.80
Class 2 NIC:
- Profits are above the Small Profits Threshold (£6,845), so Tom is treated as having paid Class 2 automatically
- £0 to pay
Tom's total NIC: £1,765.80
For comparison, Tom's Income Tax on £42,000 profit would be approximately £5,886 (using the 2025/26 personal allowance of £12,570 and basic rate of 20%). His combined tax and NIC bill is around £7,652 — roughly 18% of his profit.
This is why many guides suggest setting aside 25–30% of your profits to cover both Income Tax and National Insurance.
Frequently Asked Questions
Do I pay National Insurance on all my self-employed income?
No. Class 4 NIC is only charged on profits above the Lower Profits Limit (£12,570 in 2025/26). Profits below this threshold are not subject to Class 4. If your total self-employed profit is under £12,570, you pay no Class 4 NIC at all.
What's the difference between Class 2 and Class 4?
Class 2 is a flat-rate contribution (£3.50 per week in 2025/26) that provides state pension and benefit entitlement. Class 4 is a percentage-based charge on your profits (6% on profits between £12,570 and £50,270) that does not provide any benefit entitlement — it functions purely as a tax.
Do I need to pay National Insurance in my first year of self-employment?
It depends on your profits. If your first-year profits exceed £12,570, you'll owe Class 4 NIC on the amount above that threshold. For Class 2, if your profits are above the Small Profits Threshold (£6,845), you're automatically credited. If your profits are lower, consider paying voluntary Class 2 to secure a qualifying year for your state pension record.
Can I check how many qualifying years I have?
Yes. You can check your National Insurance record through your personal tax account on GOV.UK. It shows how many qualifying years you have, whether there are gaps, and whether voluntary contributions could fill them.
Is National Insurance the same as Income Tax?
No. National Insurance and Income Tax are separate charges, though both are calculated on your self-employed profits and collected through Self Assessment. Income Tax funds general government spending, while National Insurance contributions are linked to benefit and pension entitlements. You can owe one without the other — for example, if your profits are below the personal allowance but above the Class 4 Lower Profits Limit, you would owe neither (since both thresholds are currently aligned at £12,570).
This guide is for informational purposes only and does not constitute tax, legal, or financial advice. Tax rules change frequently. Always verify current requirements on GOV.UK or consult a qualified accountant for your specific situation.