While those on a payroll system will have contributions taken automatically via PAYE, self-employed people need to organise their own National Insurance payments through their self-assessment tax return.
If you’re self-employed, there are three types of National Insurance you may have to pay. These are based on how much profit you make in a year and are split into classes. Those in self-employment will either be: Class 2, Class 3 or Class 4.
Most people will end up paying Class 2 and Class 4 contributions – a lesser rate on profits exceeding the lowest threshold, and a higher rate on profits that go into the Class 4 boundary.
If you earn below the threshold for Class 2 contributions, you do not need to pay any National Insurance due to having low earnings, however, even if you earn below the Class 2 threshold, you may choose to make these contributions anyway at the same rate. This will allow you to avoid gaps in your payment history, as these gaps mean you may not have enough years of contributions to get the full state pension. Alternatively, you may choose to make voluntary Class 3 contributions, though the rate tends to be higher, and you may not qualify for certain benefits.
Rates for 2022/23:
- The National Insurance lower profits limit for Class 4 National Insurance contributions is £11,908.
- The main rate of Class 4 contributions is 9.73%, payable on profits above £11,908 up to £50,270.
- The additional rate is 2.73% payable on profits over £50,270.
- The small profits limit for Class 2 contributions is £6,725.
- A new lower profits threshold of £11,908 applies for Class 2 contributions.
- Class 2 contributions are treated as paid at a notional zero rate by self-employed with profits between £6,725 and £11,908.
- The Class 2 rate where profits exceed £11,908 is £3.15 per week.