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How to pay National Insurance when self-employed or running a business

HM Revenue and Customs building

Whether you’re self-employed or run your own business, you need to understand how to pay National Insurance to HMRC. For starters, you’ll usually pay Class 4 National Insurance through your annual Self Assessment tax return and can voluntarily pay Class 2 National Insurance.

Read on to understand rates, thresholds, and what National Insurance you need to pay if you employ people.

What is National Insurance?

National Insurance contributions (NICs) are a tax on earnings paid by the UK public. National Insurance qualifies you for benefits, including your state pension and certain support allowances.

4 classes of National Insurance

National Insurance is broken down into different ‘classes’. The class you pay depends on your employment status:

  • Class 1 – employees earning more than £242 a week and under the state pension age pay Class 1 contributions, which are deducted by the employer (you’ll also pay this if you’re both self-employed and employed)
  • Secondary Class 1 – if you employ people, you pay secondary Class 1 contributions on your employees’ earnings
  • Class 2 and Class 4 – self-employed people pay National Insurance in these two (Class 2 NICs have been abolished from April 2024 but continue on a voluntary basis)
  • Class 3 – this is a voluntary National Insurance you can use to fill any gaps in your contributions so you can qualify for a state pension

How do I pay National Insurance?

Most self-employed people pay National Insurance through their annual Self Assessment tax return. The deadline to file your return and pay your bill is 31 January each year.

Read our guide on how to file a Self Assessment tax return for more on this topic.

This means you pay National Insurance in arrears. We list the rates and thresholds for both the current and the previous tax year below.

Some self-employed people might pay National Insurance differently:

  • you won’t pay NICs if you’re under 16, or over the state pension age (unless you pay Class 4 NICs, which you stop paying at the end of the tax year in which you reach state pension age)
  • you won’t have to pay Class 2 NICs if you’re a married woman who opted into the Reduced Rate scheme before it ended in April 1977
  • separate rules apply to share fishermen and volunteer development workers

Some self-employed people don’t pay National Insurance contributions through Self Assessment, but they may choose to make voluntary contributions. These workers include:

  • examiners, moderators, and invigilators
  • religious ministers, providing that they receive no salary or stipend
  • people who make investments, but without receiving a commission or fee, and not as a business
  • some people whose business involves land or property

National Insurance rates for self-employed taxpayers 2023-24

Class 2 and Class 4 National Insurance is charged at different rates.

Class 2 National Insurance contributions are fixed at £3.45 a week and it’s only charged if your annual profits are £6,725 or more.

Class 4 National Insurance contributions are only charged if your profits are above £12,570 a year.

You’ll pay a different rate depending on the NI threshold you fall into (more on this below).

Changes from April 2024

New rates and thresholds will apply from 6 April 2024.

As part of the Autumn Statement 2023, Chancellor Jeremy Hunt announced that Class 2 NICs will be abolished for the self-employed from the 2024-25 tax year onwards.

From 6 April 2024, self-employed people with profits above £12,570 will no longer need to pay Class 2 NICs. They’ll continue to get full access to entitlements such as state pension and credits.

Also announced in the Autumn Statement, Class 4 NICs will be cut by 1p for around two million people from the 2024-25 tax year onwards.

And in the Spring Budget, the government announced a further 2p cut to self-employed National Insurance, seeing Class 4 National Insurance cut from 9 per cent to 6 per cent from April 2024.

What is Class 2 National Insurance?

Class 2 National Insurance contributions are fixed at £3.45 a week and it’s only charged if your annual profits are £6,725 or more.

Class 2 NICs

2023-24

Small profits threshold

£6,725

Weekly rate

£3.45

What is Class 4 National Insurance?

For the 2023-24 tax year, the Class 4 National Insurance percentage is nine per cent if you’re earning profits between £12,570 and £50,270. It’s two per cent on profits over £50,270.

Class 4 NICs

2024-25

2023-24

Self-employed people start paying above

£12,570

£12,570

A lower rate above

£50,270

£50,270

Initial rate

6%

9%

Rate above £50,000

2%

2%

Voluntary National Insurance self-employed contributions

You can choose to make voluntary National Insurance contributions. You might do this if there are gaps in your National Insurance record that could affect your entitlement to the state pension, or if you had small profits during periods of self-employment.

If you’re concerned that there may be gaps in your National Insurance record, you use the government’s National Insurance record check to find out where you stand. You can then check whether you’re eligible to make voluntary contributions.

How can I get a National Insurance refund?

If you think you’ve overpaid your National Insurance or shouldn’t have paid it at all, you can claim a refund from HMRC.

Self-employed people are more likely to overpay National Insurance because their employment circumstances are more complicated than employed people paid through Pay As You Earn (PAYE).

HMRC doesn’t check the accuracy of the NICs you make, so it’s important for you to check that you’re not overpaying and apply for a refund if you’re due one.

For example, a self-employed person could be overpaying NICs if their profits were under the small profits threshold or if they have several jobs, meaning they’re employed and self-employed at the same time.

When you request a National Insurance tax refund, you’ll be asked which class of NICs you want refunded (Class 1, Class 2, Class 3, or Class 4).

You can work out what NICs you need to pay and what you could be owed by using a National Insurance refund calculator.

Claiming a Class 2 refund

If you want to claim a refund for Class 2 contributions that you don’t think you should have paid, you’ll need to fill out a CA8480 form.

If you think you’ve paid too much Class 2 National Insurance, you’ll need to write to HMRC with your National Insurance number, why you think you’ve overpaid, the tax year you’re claiming for, and a copy of your earnings.

Claiming a Class 4 refund

If you want a repayment of Class 4 contributions that you don’t think you should have paid, you’ll need to contact the Self Assessment Helpline within five years of the tax year you want a refund for.

If you think you’ve paid too much Class 4 National Insurance, you’ll need to fill out a CA5610 form from 1 February in the tax year after the one you’re claiming for.

What National Insurance contributions do employers make?

On behalf of your employees, you deduct 10 per cent from their pay on earnings between the primary threshold (£1,048 monthly or £242 weekly) and the upper earnings limit (£4,189 monthly or £967 weekly).

You deduct two per cent on pay above the upper earnings limit.

From 6 April 2024, the main rate of employee National Insurance is eight per cent. The upper earnings limit remains at two per cent.

These are your employees’ Class 1 National Insurance contributions.

Employers pay contributions towards their employees’ National Insurance (these are known as secondary contributions).

This is at 13.8 per cent above the secondary threshold (which is £758 monthly or £175 weekly).

Make sure you claim the employment allowance, which reduces your annual National Insurance liability by £5,000 a year.

Read more:

Is there anything else you’d like to know about how to pay National Insurance? Let us know in the comments below.

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Photograph: William/stock.adobe.com

Sam Bromley

Sam has more than 10 years of experience in writing for financial services. He specialises in illuminating complicated topics, from IR35 to ISAs, and identifying emerging trends that audiences want to know about. Sam spent five years at Simply Business, where he was Senior Copywriter.

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