National Insurance for Self-Employed

Self-employed individuals in the UK pay National Insurance contributions (NICs) alongside Income Tax. Unlike employees, the self-employed pay no employer NICs on their own income, but they pay Class 2 and Class 4 contributions. Understanding how NICs work is essential for tax planning and for protecting your entitlement to the State Pension and other benefits.

Class 2 National Insurance

Class 2 NIC is a flat weekly amount of £3.45 (2025–26 rate) payable by self-employed individuals with profits above the Small Profits Threshold of £6,725 per year. If your profits are below this threshold, you can pay voluntary Class 2 contributions to protect your National Insurance record. Class 2 counts towards the State Pension, the contributions-based Employment and Support Allowance, and Bereavement Benefit. It is collected through the Self Assessment system alongside Income Tax and Class 4 NIC.

Abolition of Class 2 NIC

As part of reforms announced in the Spring Budget, Class 2 NIC is being abolished from April 2026 for self-employed people with profits above the Small Profits Threshold. Those with profits below the threshold will still be able to pay voluntary Class 2 to protect their contribution record. The abolition simplifies the NIC system by removing one of the two contribution classes for the self-employed. The entitlement to the State Pension and other benefits that previously required Class 2 contributions will instead be met through Class 4 contributions.

Class 4 National Insurance

Class 4 NIC is payable on self-employed profits at: 9% on profits between the Lower Profits Limit (£12,570) and the Upper Profits Limit (£50,270), and 2% on profits above £50,270. Class 4 is calculated on the Self Assessment return and collected alongside Income Tax. Unlike Class 2, Class 4 contributions do not currently count towards benefit entitlement — they are essentially an additional tax on self-employed profits. However, following the abolition of Class 2, the government plans to align Class 4 with benefit entitlement.

Merger with Income Tax

There have been long-standing proposals to merge National Insurance with Income Tax to simplify the tax system. While full integration has not yet occurred, the abolition of Class 2 and the alignment of contribution rates are steps in that direction. Self-employed individuals effectively pay a combined rate of Income Tax (20% basic rate) plus Class 4 NIC (9%) on profits in the basic-rate band, giving an effective marginal rate of 29% on profits between £12,570 and £50,270.

Contribution Record for State Pension

To qualify for the full State Pension, you need 35 qualifying years of National Insurance contributions or credits. Self-employed individuals build qualifying years through their NIC payments. Under the current system, both Class 2 and Class 4 contributions count towards the qualifying year, provided your profits are above the Small Profits Threshold. After the abolition of Class 2, your qualifying year will be determined by your Class 4 payments. You can check your National Insurance record online through HMRC and make voluntary contributions to fill gaps.