Self-employed National Insurance

National Insurance for the self employedIf you are in business as a sole trader or in a partnership, you are liable for self-employed National Insurance (NI) contributions. That generally means paying flat-rate Class 2 NI and profit-related Class 4 NI or voluntary Cass 3 NI.

Paying self-employed National Insurance contributions

You register to pay self-employed National Insurance contributions (NICs) as part of registering for tax self assessment.

Class 4 and Class 2 NI contributions are due at the same time as income tax payments and are both collected through self assessment - twice a year, by 31 January and 31 July.

You do not have to make Class 4 or Class 2 NICs if you are under 16 or have reached state pension age.

Class 4 NI

  • Class 4 NI contributions are based on your level of profits. You must pay Class 4 NI if your profits are above the Lower profits limit (LPL) which is £8,631 for 2019/20 (£8,424 for 2018/19, £8,164 for 2017/18);
  • You pay 9% Class 4 NI on profits from the LPL to the Upper profits limit (UPL) which is £50,000 for 2019/20 (UPLs: £46,350 for 2018/19, £45,000 for 2017/18);
  • You pay 2% on profit in excess of the UPL of £50,000 (UPLs: £46,350 for 2018/19, £45,000 for 2017/18).

If you have more than one business, special rules can apply to the calculation of Class 4 NI contributions in some circumstances - for example, if one of your businesses makes a loss.

Class 2 NI

Class 2 NI contributions are charged at a flat weekly rate of £3.00 (£2.95 for 2018/19, £2.85 for 2017/18) and affect your entitlement to some benefits, such as the state pension.

The small profits threshold applies if your earnings are below £6,365 fro 2019/20 (£6,205 for 2018/19, £6,025 for 2017/18). Where this is the case, no Class 2 NICs are payable and an exemption is no longer required.

Class 3 NI

You may have gaps in your national insurance record if, for example, you did not pay contributions because of small profits.

If you are eligible, you can voluntarily pay Class 3 NI contributions for the past six years to ensure you receive a State Pension. Check your NI record using your HMRC personal tax account to find out how much you need to pay.

Class 3 does not entirely make up for a Class 2 shortfall for all benefits. Class 3 does not give entitlement to Employment and Support Allowance, Maternity Allowance or Bereavement Support Payment.

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