How much National Insurance do I pay if I’m self-employed?

I’m employed full time but I’m considering being self-employed part time as well. I pay National Insurance 1 in my employed wages but want to opt out of the NI 2 for my self employed job. Would this affect my entitlements to benefits from the NI? And how much national insurance do I pay when self-employed?

How to pay National Insurance when self employed

Stop googling, ‘How to pay National Insurance when self employed’, because we’ve got the answer 

You say you currently pay a class 1 contribution from your wages working full time. That’s a good start, but if you want to move towards being self-employed you’ll also need to register with HM Revenue and Customs (HMRC) here. That way you can pay National Insurance relating to your self-employment online.

Class 2 and class 4 National Insurance contributions for self employed people

If you’re wondering ‘How much National Insurance do I pay when self-employed?’ The answer is – it depends

If you earn under £6,515 from your self employment you won’t need to pay anything towards National Insurance. However, self-employed people earning profits of £6,515 or more must pay class 2 National Insurance contributions (NIC). If you’re earning over £9,569 from self-employment you’ll also need to pay class 4 National Insurance contributions.

Both class 2 and class 4 NIC can be paid online via a self-assessment tax return. Unfortunately, your current situation means that you’ll have to pay both class 1 NIC (in this case your income tax and national insurance get taken out of your employed salary) as well as at least class 2 NIC, although class 4 might be added depending on your self-employed income. You can find out more about self-assessment here.

Self employment and benefits

You’ll need to make sure you’ve paid all the National Insurance contributions you owe to protect your entitlement to benefits. This means that you can’t opt out of paying class 2. You can check your National Insurance record here to double check that you’re still entitled to benefits. If things aren’t up to scratch then you can always make voluntary contributions to cover any payments you’ve missed.

How much do I pay when self employed?

Your self employment National Insurance contributions are determined by the amount you earn from said self employment. So, Class 2 national insurance payments are fixed at £3.05 per week while Class 4 contributions are billed at 9% of profits between £9,568 and £50,270. And Class 4 contributions for profits above £50,270 are 2%.

There are some exemptions but these only apply in very limited circumstances. Sadly, even if you do find out you’re exempt from NIC, it doesn’t mean your tax bill will be blank. You’ll still have to pay capital gains tax, and/or council tax at the end of the tax year, a.k.a. April 2022. If it makes you feel any better, a lot of these taxes go towards funding things like health and social care in the country. 

For details of whether you would be exempt you should refer to this article on the government’s website.

Further information on NICs

Here are some extra resources:

Answered by bss on 20-May-2013

Next Steps

  • Chat about this subject on our Discussion Boards.
  • Need help but confused where to go locally? Download our StepFinder iPhone app to find local support services quickly.