National Insurance Contributions

Class 4 National Insurance

Class 4 National Insurance is bit of a misnomer as it’s really a form of tax levied on your business profits and doesn’t count towards your retirement pension or any other state benefits you might be entitled to claim (e.g. maternity allowance).

Class 4 NI is payable at 6% on any profits between a lower and higher threshold and 2% for any profits above the higher threshold.

To find the latest rates go to https://www.gov.uk/self-employed-national-insurance-rates.

As an example for the 2024/25 tax year Class 4 NI is 6% of profits between £12,570 and £50,270 and 2% over that amount.

So if your profits are £35,000 then you will pay Class 4 NI of £1,346 (being 6% of £35,000 less £12,570) and if your profits are £51,000 then you will pay Class 4 NI of £2,277 (being 6% of £50,270 less £12,570 and 2% of £51,000 less £50,270).

Class 2 National Insurance

As well as Class 4 NI you also have to pay Class 2 National Insurance.

To find the latest rates go to https://www.gov.uk/self-employed-national-insurance-rates.

As an example for the 2024/25 tax year Class 2 NI is £3.45 if your profits are over £6,725.

If your business profits are below £6,725 per annum, you may wish to pay Class 2 NI voluntarily in order to maintain entitlement to any state benefits – unlike Class 4 NI, Class 2 National Insurance contributions count towards your contribution record.

No-one likes paying tax, but we would recommend you open a designated bank account to set aside monies for your tax payments.

We will work closely with you to help you avoid any nasty shocks just after Christmas and before you go away on your summer holiday!

Watch out though as the taxman, just like the bank and credit card companies, charges interest and penalties for late payment!