NIC for the self-employed

Overview

You only pay National Insurance contributions (NIC) between the ages of 16 and state retirement age. You can find out your state pension age by using the calculator on GOV.UK.

For 2023/24, you pay two different classes of NIC if you are self-employed and earning sufficient profits: class 2 and class 4.

From 6 April 2024, self-employed taxpayers no longer need to pay class 2 NIC. However, in certain circumstances you may wish to pay class 2 NIC voluntarily (see the heading below).

If you are a married woman or widow and you are entitled to pay reduced rate contributions, you do not need to pay class 2 NIC – see under the heading Reduced rate contributions for more information. There are also special rules relating to share fishermen, volunteer development workers, and those engaged as examiners and exam markers, which you can read about on GOV.UK.

In rare cases, income for NIC purposes might include income from property letting (see GOV.UK) or from cryptoassets.

Registering for class 2 and class 4 NIC

When you register with HMRC as self-employed, the registration covers both income tax and National Insurance. You can find out about registration at Self-employment: registering for tax and NIC.

  If you do not register your self-employment with HMRC, then any class 2 NIC payments may be rejected by HMRC, or class 2 NIC payments you are treated as having made may not be recorded. It is not sufficient to state on your tax return that you have started self-employment. Instead, you should follow HMRC’s registration process for the self-employed (or advise them separately you have started self-employment), even if you are already completing self assessment tax returns for other reasons.

Class 2 NIC amounts

Class 2 NIC – whether paid on a mandatory or voluntary basis – are a fixed weekly amount: £3.45 per week for 2024/25 and 2023/24 (see below for more details).

As mentioned above, from 6 April 2024, self-employed taxpayers no longer need to pay class 2 NIC. However, in certain circumstances you may wish to pay class 2 NIC voluntarily, see our heading Voluntary Class 2 NIC, below.

The amount of class 2 NIC due is based on the number of weeks in which you are self-employed in the tax year. A week runs from a Sunday to Saturday. If a contribution week straddles two tax years, it is treated as falling in the earlier year.

For example, if your self-employment began on 4 February 2024 and your profits exceed the lower profits limit for that year, you should pay 9 weeks’ class 2 NIC for 2023/24, that is, 9 x £3.45 = £31.05 as there are 9 weeks between 4 February 2024 and 5 April 2024 (that contribution week ends on 6 April 2024).

When class 2 NIC is payable

The rules on class 2 NIC have changed in recent years. Depending on the tax year and your profits for that year, class 2 NIC may:

• be payable voluntarily
• be treated as being paid
• need to be paid

If you have multiple trades, your profits are combined for the above purposes.

Under the heading Voluntary class 2 NIC below, we explain some considerations if you are thinking of reducing your self-employment work and your profits fall below the small profits threshold.

Class 4 NIC

Class 4 NIC is based on the level of your taxable self-employed profits. You are only liable to pay class 4 NIC if your profits are over the lower profits limit (see the table above for the values of the lower profits threshold from 2021/22 to 2024/25).

The NIC is paid in profit bands as follows (figures shown for 2024/25, for earlier tax years see tax and NIC rates and bands):

Paying class 2 and class 4 NIC

Class 2 NIC and class 4 NIC are calculated and paid along with income tax due, through the self assessment system. If you make payments on account, then your class 4 NIC will be included when calculating the instalments. If you do not pay your tax through payments on account, then the class 4 NIC will usually be due on 31 January following the end of the tax year to which it relates. Class 2 NIC is usually paid as part of the payment due on 31 January following the end of tax year, regardless of whether you make payments on account.

If you have to rely on class 2 NIC for entitlement of certain benefits, for example maternity allowance, and you are not treated as having already paid class 2 NIC (see the above heading When class 2 NIC is payable), you may need to pay your class 2 NIC before the self assessment deadline. We explain why under the heading Maternity allowance below.

If you are treated as having paid class 2 NIC (see the above heading When class 2 NIC is payable) then you should ensure your tax return is filed before the self assessment deadline, so that your NIC record can be updated in time for any contributory benefits which rely on that deemed payment.

If you prefer, you can make regular payments of class 2 NIC throughout the tax year, rather than a lump sum payment. This is called a budget payment plan.

Reduced rate contributions

Married women could apply for a reduced rate of contributions before 1977. A subsequent annulment of marriage, or divorce, immediately stops entitlement to paying reduced contributions. If you are not sure whether or not you are entitled to pay at the reduced rate you can enquire on HMRC’s form CF9 (married women) or form CF9A (widows) to find out. The same forms are used to give up your right to pay reduced rate contributions.

Employed and self-employed

Class 2 NIC

Usually, you will still need to pay class 2 NIC if you are employed and self-employed.

But if you pay a maximum amount of class 1 NIC on your employment income, you may not need to pay any more contributions. Your class 2 NIC liability is automatically calculated as part of the self assessment process, provided that you either file online or your paper tax return is submitted by the due date (normally 31 October, following the end of the tax year). If you are due to pay any class 2 NIC, it is included with the tax you are due to pay on 31 January following the end of the tax year to which it relates.

Class 4 NIC

Usually, you will still need to pay class 4 NIC if you are employed and self-employed.

But if you pay a maximum amount of annual NIC by way of class 1 and/or class 2 contributions, you may not need to pay the full amount of class 4 NIC. If this is the case, then you will have to pay 2% class 4 NIC on all profits above the level of £12,570 (for 2024/25). Your class 4 NIC liability will be automatically calculated, provided that you either file online or your paper tax return is submitted by the due date (normally 31 October, following the end of the tax year), as part of the self assessment process.

State benefits

You can find details of the benefits to which class 2 gives entitlement on our National Insurance page.

Class 4 NIC do not count towards any state benefits.

Voluntary class 2 NIC

You might choose to pay class 2 NIC even if:

• your earnings are below the small profits threshold (as explained under the heading When class 2 NIC is payable above), or
• you are exempt from paying class 2 because you are entitled to reduced rate contributions (as discussed under the heading Reduced rate contributions above).

This is because you may want to protect your eligibility to certain state benefits. Eligibility for some state benefits relies on you having paid a certain amount of class 2 NIC within a defined time. The two benefits most likely to be affected are maternity allowance and in some specific circumstances, contributions-based employment and support allowance (ESA). See the headings below on Maternity allowance and Contributions-based employment and support allowance for more information.

If this is the case, you should contact HMRC and make arrangements to pay the class 2 NIC before the self assessment deadline.

The state pension also depends on you having paid or been credited with sufficient NIC over your working life.

If you usually make self-employed profits above the small profits threshold but are considering reducing your working hours then you should consider whether you already have enough qualifying years for National Insurance for the state pension, by checking your National Insurance record. If you do not have the required 35 qualifying years for a full state pension, then you should consider whether the reduced level of your self-employment profits will still mean you are paying (or deemed to be paying) National Insurance.

Alternatively, if you are in a position where you might qualify for a National Insurance credit, then you still may continue to obtain qualifying years for National Insurance purposes.

If neither of the above apply, you could consider making voluntary contributions for the year. However, before doing so, it is always recommended that you contact the Future Pension Centre for further information.

Maternity allowance

Entitlement to maternity allowance is based on NIC paid in the 66 weeks before the baby is due. This period is known as the test period.

If you are self-employed then there are different amounts of maternity allowance depending on the number of weeks you have paid class 2 NIC. These are explained on GOV.UK.

For example, if your baby was due in August 2024, then you would have had to pay sufficient contributions in the 66 weeks leading up to that date – broadly from May 2023 to August 2024. Payment of your class 2 NIC for the tax year 2023/24 is not due until 31 January 2025, so these contributions would not have been paid at the time you make a claim for maternity allowance. Although the class 2 contributions are not due until 31 January 2025, you can choose to pay them early.

Paying early contributions may mean you will have paid enough to receive standard rate of maternity allowance. You can contact HMRC for help with this.

If you have not paid your contributions early or have not paid enough, when you make the claim for maternity allowance, you should be given the opportunity to make a lump sum payment of class 2 contributions to enable you to claim the standard rate maternity allowance if appropriate – HMRC will work out how many weeks contributions need to be paid and then issue a bill for this amount.

Contribution-based employment and support allowance

Contribution-based employment and support allowance (ESA) is paid to people who are unable to work due to illness. Usually, to be paid ESA in the current benefit year (which runs from January to December) you must have paid the following National Insurance contributions:

• in one of the previous two complete tax years before the benefits year, you must have paid 26 weekly contributions, and
• in both of those two previous complete tax years, you must have paid or been credited with 50 weekly contributions.

For example, to claim ESA in December 2024, you must have paid at least 26 weekly contributions in either of the two tax years 2021/22 and 2022/23. In addition, you must have paid or been credited with 50 weekly contributions for both of those tax years.

You should note that there are some exceptions to the above contributions conditions for ESA, there is more information on the conditions to claim ESA from entitledto.

More information

You can find more information on class 2 National Insurance and class 4 National Insurance in the National Insurance Manual produced by HMRC.