Self-Employed National Insurance Explained: A Clear Guide

If you’re self-employed in the UK, getting to grips with the National Insurance system isn’t just a good idea—it’s a must. National Insurance contributions (NICs) help fund vital state benefits like the State Pension, Maternity Allowance, and Bereavement Support Payment. As a self-employed individual, it’s entirely up to you to make sure these payments are sorted.

In the 2023-2024 tax year, with just a week to go before the Self Assessment deadline, 3.4 million people were yet to file their tax returns. These contributions come in two flavours: Class 2, a flat weekly rate, and Class 4, a percentage of your profits. 

The rates can fluctuate from year to year, so staying up-to-date with the latest updates is crucial to avoiding any hiccups—and keeping your finances in order.

Understanding National Insurance

What Is National Insurance?

As a self-employed individual, you’re obligated to pay NICs to the UK government, akin to employees. These contributions support the UK’s state benefits system, including the state pension and other benefits. 

Your NICs are based on your profits and the required National Insurance class. It’s imperative to register for National Insurance with HM Revenue and Customs (HMRC) as soon as you commence your business venture.

Types of National Insurance for the Self-Employed

There are two types of National Insurance contributions that you may have to pay as a self-employed person: Class 2 and Class 4. 

Here’s a table summarising the information about Class 2 and Class 4 National Insurance contributions for the tax year 2025 to 2026:

Type of National Insurance	Rate	Threshold for Payment
Class 2	£3.50 per week	Profits of £6,845 to £12,750
Class 4	6% on profits between £12,570 and £50,270	Profits of £12,570 to £50,270
	2% on profits over £50,270

It is important to note that the Class 4 National Insurance rate may change from year to year, so it is important to check with HMRC to ensure that you are paying the correct amount.

Eligibility and Registration

Who Needs to Pay?

If you are self-employed in the UK and earn over  £6,845, you will need to pay National Insurance contributions (NICs). Otherwise, can voluntarily opt to pay Class 2 NI contributions

Registering with HMRC

Registering with HMRC is a must-do by 5th October following the end of the tax year in which you started your business, which can be done online through the HMRC website or by calling their helpline.

Upon registration, you’ll need to provide your business details, like:

• Your name
• Address 
• National Insurance number
• Select a method for your NIC payments

HMRC will then issue you a letter with your Unique Taxpayer Reference (UTR) number, essential for your tax returns and NIC payments.

Calculating Contributions

To calculate your NICs, you will need to complete a self-assessment tax return. This will help you to determine your profits and the amount of NICs you need to pay. You can find more information about self-assessment on the GOV.UK website.

Payment and Deadlines

How to Pay

You can pay your NICs through your annual Self Assessment tax return. You must file your tax return and pay your bill by 31 January each year to avoid penalties.

To pay your National Insurance contributions, you can use the following methods:

• Direct Debit
• Online or telephone banking
• Debit or credit card
• Bank transfer

You can find more information on how to pay your National Insurance contributions on the HMRC website.

When Late	Penalty
Day One	£100 (Automatic fine)
After 3 Months	£10 per day (Maximum of £900 over 90 days)
After 6 Months	£300 or 5% of the tax owed (whichever is greater)
After 12 Months	Another £300 or 5% of the tax owed (whichever is greater)

Deadlines and Penalties

The tax year runs from 6 April to 5 April the following year. You must file your Self Assessment tax return by 31 January following the end of the tax year. For example, for the tax year 2025/26, you must file your tax return by 31 January 2027.

You must pay your tax bill by 31 January following the end of the tax year. If you miss the deadline, you will be charged interest on the amount you owe. The current HMRC Tax Interest Rates (from 27 August 2025):

• Late Payment Interest Rate (what you pay HMRC): 8.00%
• Repayment Interest Rate (what HMRC pays you): 3.00%

It is important to keep track of your deadlines and pay your National Insurance contributions on time to avoid penalties and interest charges. 

Benefits of National Insurance

As a self-employed individual in the UK, paying National Insurance (NI) contributions is essential to qualify for various benefits and pensions. Here are some of the benefits of National Insurance:

State Pension

National Insurance contributions count towards your State Pension, which is a regular payment from the government to help you financially in your retirement. The amount of State Pension you receive depends on your National Insurance record and the State Pension age. You can check your State Pension age on the government website.

Other Contributory Benefits

Besides the State Pension, National Insurance contributions also count towards other contributory benefits such as:

• Jobseeker’s Allowance
• Employment and Support Allowance
• Maternity Allowance
• Bereavement Support Payment

The amount of benefits you receive depends on your National Insurance record and other eligibility criteria.

Working Beyond Self-Employment

If you are self-employed and have other sources of income, you may be required to pay National Insurance contributions (NICs) on those additional earnings too.

Combining NICs (Employment and Self-Employment):

• If you are also employed, you can combine your NICs from both self-employment and employment.
• This can be beneficial, potentially leading to a lower NICs rate on your self-employment income if your employment earnings are substantial.
• To combine them, you must provide your self-employment and employment income details to HM Revenue and Customs (HMRC) for the calculation of your total NICs liability.

Investments and Property Income:

• Income from investments or property may also be subject to NICs, but the rules differ from those for employment or self-employment income.
• Investment Income: NICs are typically only due if you are a company director or receive income from a share of business profits.
• Property Income: NICs are generally only required if you are a landlord and your profits exceed a certain threshold.

Planning for the Future

Self-employed individuals must plan to secure their financial future.

• National Insurance Contributions (NICs):
  • NICs are your responsibility as a self-employed person and count toward your State Pension and benefits.
  • To receive the full State Pension, you need a minimum of 35 years of contributions.
  • Action Item: Check your National Insurance record on the government’s website to:
    • Determine when you will reach State Pension age.
    • Identify and calculate the cost of filling any gaps in your record.
• Retirement Savings Options:
  • Personal Pension Plan: This allows you to save specifically for retirement, receive tax relief on contributions, and choose how your money is invested.
  • Selling the Business: Selling your business when you retire can provide a lump sum to support your retirement years.

Seek Advice

For detailed guidance on NICs and retirement planning (including self-employed mortgages), check the gov.uk website and always consult with qualified financial advisors for personalised advice.