What is self-employed National Insurance?
If you're self-employed, it's not just income tax you need to pay on your profits. You also have to make National Insurance contributions.
Just as with anyone who works for an employer, building up National Insurance contributions over your working life entitles you to the state pension, plus other benefits, but it can be complicated to calculate.
This guide gives you step-by-step advice to working out your National Insurance bill if you're self-employed.
- Get a head start on your 2017-18 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?.
How does self-employed National Insurance work?
National Insurance contributions are paid by employees, employers and self-employed people until they reach state pension age.
While those on a payroll system will have their contributions taken automatically, self-employed people need to organise their own National Insurance payments through their self-assessment tax return.
If you're self-employed, there are three types of National Insurance contribution you may have to pay. These are based on how much profit you make in a year, and are split into classes. Those in self-employment will either be: Class 2, Class 3 or Class 4.
Most people will end up paying Class 2 and Class 4 contributions – a lesser rate on profits exceeding the lowest threshold, and a higher rate on profits that go into the Class 4 boundary.
If you earn below the threshold for Class 2 contributions, you do not need to pay any National Insurance due to having low earnings.
However, you might want to consider making Class 3 voluntary contributions, as gaps in payments could affect your state pension and other benefits. We explain more on Class 3 contributions later on.
Find out more: National Insurance explained - read our complete guide to National Insurance.
Class 2 National Insurance contributions
The payment thresholds for NI contributions rose slightly in the 2018-19 tax year.
You pay Class 2 contributions of £2.95 a week on profits over £6,205. This totals £153.40 for the year.
For 2019-20, Class 2 contributions will be £3 a week on profits over £6,365. This totals £156 for the year.
Class 4 National Insurance contributions
In 2018-19, you'll pay Class 4 National Insurance contributions on annual profits exceeding £8,424.
You pay 9% on profits between £8,424 and £46,350. This reduces to 2% for profits over £46,350.
|Self-employed National Insurance rates|
|Class contribution||How much you earn|| |
|How much you earn|| |
|Class 2||£6,025-£8,164||£2.85 per week||£6,205-£8,424||£2.95 per week|
|Class 4||£8,164-£45,000||9% (2% from £45,001 and above)||£8,424 - £46,350||9% (2% from £46,351 and above)|
In 2019-20, you'll pay Class 4 contributions on annual profits exceeding £8,632.
You'll pay 9% on profits between £8,632 and £50,000, which reduces to 2% for profits over £50,000.
National Insurance calculator 2018-19 and 2019-20
Use our National Insurance calculator for 2017-18, 2018-19 and 2019-20 to discover how much you'll pay in each tax year. We've assumed that self-employed people have elected to pay Class 2 National Insurance contributions.
Voluntary National Insurance
Even if you earn below the Class 2 threshold, you may choose to make these contributions anyway at the same rate.
This will allow you to avoid gaps in your payment history, as these gaps may mean you won’t have enough years of contributions to get the full state pension.
Alternatively, you may choose to make voluntary Class 3 contributions, though the rate tends to be higher and you may not qualify for certain benefits. You can find out more in our guide to Class 3 contributions.
You can usually pay voluntary contributions for the past 6 years. The deadline is 5 April each year – so, the deadline to make up gaps for 2012-13 tax year is 5 April 2019.
You can’t pay voluntary contributions if you’re eligible for National Insurance credits.
Find out more: National insurance and benefits – which benefits are linked to each type of contribution?
Your National Insurance questions answered
How do I know if I have National Insurance payment gaps?
You may get gaps in your NI record if there was a period of time where you were employed and had low earnings, unemployed and weren’t claiming benefits, self-employed but didn’t pay contributions due to profits being too small or living abroad.
You can find out whether you have payment gaps by requesting your National Insurance record from HMRC.
You can do this online if you have a Government Gateway account. Alternatively, you can request a printed NI statement by filling out an online form or calling 0300 200 3500.
If you’ve paid National Insurance in the Isle of Man, your records won’t show contributions if you reach state pension age after 5 April 2016.
To find out how much you’ve paid, email the Isle of Man National Insurance office at firstname.lastname@example.org.
You should contact HMRC if you think your National Insurance record is wrong.
What if I’ve lost my National Insurance number?
Your NI number should be printed on any existing letters about tax, pensions or benefits, or on payslips or P60s if you were employed at one time.
If you still can’t find it, fill in HMRC form CA5403 and send it to the address on the form, or contact the National Insurance numbers helpline – advisers are available on webchat, you can fill in a form online, or you can call 0300 200 3500.
HMRC won’t tell you your NI number over the phone – they’ll post it to you, and it should arrive within 10 working days.
How do I pay National Insurance as self-employed person?
As soon as you become self-employed, you should register with HMRC. You’ll need to fill out a self-assessment tax return each year to report your earnings and business-related spending.
From this self-assessment, HMRC will calculate how much tax you owe based on the amount of profit you make over the tax year – your National Insurance contributions are part of this tax.
The amount of National Insurance you owe will be part of the bill HMRC issues you. For those on ‘payment on account’, this will be split into two payments due by 31 July and 31 January.
Find out more: Self-employed tax return – read our guide to completing your tax return.
Submit your 2017/18 tax return with Which?
Get a head start on your 2017-18 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?.