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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.

What is National Insurance (NI)?

National Insurance is a type of tax paid by employees, employers, and self-employed people. Also known as NI contributions (or NICs for short) these payments go towards your eligibility for the state pension and some types of benefits. To make sure National Insurance Contributions are recorded correctly, each person has their own unique NI number.

You’ll normally start making National Insurance contributions on ‘qualifying income’ once your earnings pass the NI threshold, from the age of 16 up until state retirement age (you won’t pay National Insurance on your pension or earnings after retirement). Some people decide to start their own business after retirement, but you won’t be expected to make contributions on your self-employed income if you’re older than state pension age.

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 currently two different types of self-employed National Insurance (known as classes), although one of these will be abolished from April 2024 onwards:

  • Class 2: Class 2 National Insurance is paid as a flat rate once profits reach the £12,570 Lower Profits Threshold (LPT), although Class 2 NI will be abolished from April 2024 onwards. You will still need to pay Class 2 NI on profits for the 2023/24 tax year (6th April 2023 – 5th April 2024)
  • Class 4: Class 4 NI is paid as a percentage of any profits you earn above the £12,570 Lower Profits Limit (LPL)

 

Annual Threshold
2023/24
Annual Threshold
2024/25
No National Insurance to pay on profits in this range, but you can make voluntary payments to fill any gaps in your NI record. Below £6,725 Below £6,725
Small Profits Threshold (SPT): You won’t pay NI on profits at or above this and below the Lower Profits Threshold (LPT), but you will accrue National Insurance credits. £6,725 £6,725
Lower Profits Threshold (LPT): Start paying Class 2 National Insurance once profits reach this threshold.

2023/24: £3.45 per week
2024/25: Abolished
£12,570 £12,570
Lower Profits Limit (LPL): Pay Class 4 National Insurance on profits above this threshold at a rate of:

2023/24: 9%
2024/25: 6%
£12,570 £12,570
Upper Profits Limit (UPL): Pay Class 4 NI at a slightly different rate on profits above this threshold.

2023/24: 2%
2024/25: 2%
£50,270 £50,270

How do I pay National Insurance (NI)?

Self-employed people pay National Insurance when they submit their Self Assessment tax return to report the profits and other income they receive in a tax year.

You’ll be given a tax calculation once you submit your return, and this will show the breakdown of different taxes that you owe. There are several options for paying your Self Assessment tax bill – just make sure you don’t miss the deadline!
 

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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 on the same money!

Your remaining income can then be taken from the company in the form of dividends, which aren’t subject to National Insurance.

What happens if I have gaps in my NI record?

The National Insurance contributions you make go towards your State Pension and some types of benefits. Gaps in your NI record can affect your entitlement to these or how much State Pension you get.

You can check your National Insurance record online using your Personal Tax Account, and make voluntary contributions to fill any gaps.

 
Learn more about our online accountancy services for self-employed people like you. To talk to one of the team, call 020 3355 4047, request a free call back, or get an instant online quote.

About The Author

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.

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