If you work for your own self-employed business, then you may need to pay National Insurance on the profits that you earn. In this article we explain how National Insurance works for self-employed people, how much you need to pay, and when.
National Insurance is a type of tax paid by employees, employers, and self-employed people. The National Insurance contributions that you make go towards your eligibility for some types of benefits and the state pension.
To make sure National Insurance Contributions are recorded correctly, each person has their own unique NI number.
How much is self-employed National Insurance?
Self-employed people pay National Insurance on their profits, so the amount of NI you pay depends on how much profit you make in a year.
There are different types of self-employed National Insurance, known as classes:
National Insurance when you’re employed and self-employed
Some people work for an employer and run a business in their spare time, but the National Insurance you pay as an employee is different to the NI you pay for self-employment.
Your employer will normally collect any National Insurance you owe by deducting it from your wages, and then sending it on to HMRC along with their own contribution.
You’ll report any tax and National Insurance you’ve paid through your employer when you complete your Self Assessment tax return, but you won’t need to pay tax on the same money twice.
National Insurance if you run your own limited company
If you operate your own limited company, then you might decide to pay yourself a salary as a director. This means that you’re (sort of) both an employee and the employer, so most directors take a smaller salary at or below the threshold for paying National Insurance – otherwise you might end up paying two lots of NI!
Your remaining income can then be taken from the company in the form of dividends, which aren’t subject to National Insurance.