National Insurance (NI) for the self-employed

Everyone between the age of 16 and state pension age (66 for men and women by 2020) who are 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 set up.

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 than 16).
  • It's £2.95 per week for the tax year 2018/19 if your expected earnings exceed £6,205 per year.
  • You pay monthly by direct debit or quarterly by a bill.
  • If you have expected earnings of less than £6,205 for the tax year 2018/19, you can apply to HMRC for exemption.

Class 4 NICs:

  • If you make more than £8,424 profit in the tax year 2018/19, you need to pay Class 4 NICs on top of your Class 2 NICs.
  • 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 £46,350 for tax year 2018/19, Class 4 NICs are 9% of your profit.
  • For profits over £46,350, your Class 4 NICs are 2% of your profit.
  • If you have more than one business, different rules apply when you're calculating your Class 4 NICs. Take a look at this 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.

FAQ

What if I'm self-employed but I have a PAYE-paying job as well?
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 do?

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.

Resources

  • HMRC NI helpline: 0845 915 4655

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