National Insurance (NI) for the self-employed
Hey - want to start a business? SmartaStart2013 takes you through the process
in 7 simple steps. Go there
Everyone between the age of 16 and state pension age (60 for
women, 65 for men) who's working needs to pay National Insurance
contributions (NICs) to HMRC. If you're self-employed, you'll
need to sort out your own NICs. The good news is, as a
self-employed person, you pay much less National Insurance than if
you were an employee.
Note that if you've set up a limited company, the following
doesn't apply to you, as you make your NICs via the PAYE system you
What are NICs?
- National Insurance is a scheme where people in work make
payments towards state benefits and services, such as the NHS and
your state pension.
- The National Insurance scheme is administered by the Inland
Revenue and the Contributions Agency.
- HMRC will send you more information on NICs and how to
pay them when you register as self-employed.
What you have to pay for National Insurance
There are two types of NICs for self-employed people - Class 2
and Class 4.
Class 2 NICs:
- You have to pay Class 2 NICs if you are
self-employed (unless you are state pension age or younger
- It's £2.40 per week for the tax year 2010/11.
- You pay monthly by direct debit or quarterly by bill.
- If you have expected earnings of less than £5,075 for the
tax year 2010/11, you can apply to HMRC for
Class 4 NICs:
- If you make more than £5,715 profit in the tax year
2010/11, you need to pay Class 4 NICs on top of your Class 2
- You don't need to worry about them until the end of the
tax year, as they are worked out for you by HMRC as part of
your self assessment tax return, and charged to you along with
other tax you owe.
- If your profit is between £5,715 and £43,875 for tax year
2010/11, Class 4 NICs are 8% of profit.
- If your profit is more than £43,875, Class 4 NICs
- If you have more than one business, different
rules apply when you're calculating your Class 4 NICs. Take a look
helpsheet from HMRC for more info (opens PDF).
In some special cases if you are a self-employed married woman
or widow, you may be entitled to the reduced rate Class 1 NICs.
What if I'm self-employed but I have a PAYE-paying job as
The same NIC rules apply as above for your self-employed work,
while you also pay NICs as normal through the PAYE system. In other
words, you pay Class 1 contributions as well. However, you can
apply to defer payment of your Class 2 and Class 4 contributions -
talk to HMRC for more info.
I'm worried about being able to afford my NICs. What can I
HMRC has introduced the Business Payment Support Service (BPSS) to
help businesses in your situation, which can help you make
arrangements. Call 0845 302 1435 to get more advice.
- HMRC NI helpline: 0845 915 4655
Smarta Business Builder
To help you on your business journey, we've created Smarta Business Builder, the complete online
tools package for growing your business. Website
Documents and Email - all in one place
- from just £20 per month with no contract! Try it out today.