How to Pay National Insurance When You’re Self-Employed: A Complete Guide

How to Pay National Insurance When You’re Self-Employed: 
A Complete Guide

A simplified guide to National Insurance for the self-employed, from how to register for National Insurance, how it’s calculated, and what to do if you think you’ve overpaid.

What is National Insurance?

National Insurance Contributions (often abbreviated to NICs) are the UK’s second-largest tax , payable by both employed and self-employed workers between the ages of 16 and under the state pension retirement age. First introduced in pre-war Britain in 1911 and expanded by Clement Attlee in 1946 , NICs help fund various social security benefits, including the State Pension, unemployment benefits, and the NHS. 

How do I register for National Insurance when I’m self-employed?

When you register with HMRC to complete your annual Self Assessment tax return, you’ll also be registered to pay National Insurance. You’ll pay National Insurance at the same time as your Self Assessment tax bill. 

How is National Insurance calculated for self-employed people?

NICs are sorted by different ‘classes’, which are different categories assigned to people depending on their employment status and income level. Broadly speaking, there are four classes of NI:

• Class 1: Applies to employees working for a company on a PAYE basis
• Classes 2 and 4: Applies to self-employed people
• Class 3: Applies to voluntary contributions 

Naturally, as a self-employed person, you don’t have to worry about class 1 contributions, so we’ll focus on the other categories. 

Class 2 National Insurance

Strap in – Class 2 National Insurance can get a little complicated!

In April 2024, the government effectively abolished Class 2 National Insurance in favour of a system intended to make things simpler as well as save self-employed people money.

Previously, self-employed people paid Class 2 National Insurance contributions at a flat rate per week if their self-employed profits were £12,570 or more.

Now, individuals earning over that amount are not required to pay Class 2 NICs, but will still be treated as having paid a qualifying year of National Insurance. This is important because 35 years of National Insurance contributions are required in order to claim the full state pension. 

However, if your profits are below £6,725 per year, you won’t be considered to have paid Class 2 NI. This means that, in order to make the full 35 years of contributions, you’ll need to pay Class 2 NI voluntarily at a rate of £3.45 per week for tax year 2024/25. 

However, remember that things can always change, so be sure to keep an eye on any future Budget updates. 

Class 4 National Insurance

If you’re self-employed, you’ll almost always be paying Class 4 National Insurance, which is charged on annual profits over the lower annual profits limit, currently £12,570 .

For tax year 2024 to 2025 you’ll pay:

• 6% on profits of £12,570 up to £50,270
• 2% on profits over £50,270 

As an example: If your annual profits are £40,000, you would pay 6% on the profits between £12,570 and £40,000, which amounts to £1,645.80

This system is designed to make sure that self-employed individuals contribute fairly based on their earnings, with the rates designed to scale according to income.

Voluntary National Insurance contributions

Voluntary contributions can be paid to fill gaps in your National Insurance record, which – as we’ve discussed – can affect your entitlement to things like the State Pension. You can check your National Insurance record here to see to find out where you stand.  

Voluntary NI contributions are categorised either as Class 2 or Class 3, depending on your individual circumstances. For example, people who are employed and want to make voluntary contributions will pay Class 3, but self-employed people might need to pay Class 2 or Class 3. This is because different classes of National Insurance contribute towards different benefits and pension schemes.

You can find out which voluntary National Insurance class you should be paying here.

What if I’ve overpaid National Insurance?

It’s quite rare for people to overpay National Insurance, but it can happen in some circumstances. For example, if you carried on paying Class 4 NI after reaching state pension age, or you were employed and self-employed at the same time and paid Class 1, Class 2 and Class 4.  If you think you might have overpaid, you can find more information on how to claim a refund here.