National Insurance When You Work for Yourself, in Plain Terms

Class 2 barely exists any more and Class 4 is the one that costs you. Both matter for the state pension, which is the part most people miss.

Self-employed National Insurance is two separate charges with confusingly similar names, and the one that costs you money is not the one that earns you a pension.

Class 4 — the one you pay

Class 4 is charged on your profits for 2026/27 as follows:

On profits of £40,000 that is about £1,646, on top of Income Tax. It is collected through Self Assessment alongside the tax, which is why the January bill is larger than a quick Income Tax calculation suggests.

Note what happens above £50,270: the rate falls to 2%. National Insurance is not progressive in the way Income Tax is.

Class 2 — the one that counts

Class 2 used to be a flat weekly charge. It is now treated as having been paid once your profits reach the small profits threshold of £7,105. You get the credit without paying anything.

That credit is the point. Class 2 is what builds your entitlement to the state pension and certain other benefits. Class 4, despite costing you considerably more, has historically built no entitlement whatsoever.

If your profits are low

Below £7,105 you get no automatic credit — but you can pay Class 2 voluntarily at £3.65 a week, under £190 for a full year.

For a quiet year, a startup year, or a year taken out, that is worth thinking about carefully. A qualifying year of state pension is worth many multiples of £190 over a retirement. Check your record on GOV.UK first: if you already have the years you need, there is nothing to buy.

Two jobs

If you have a PAYE job as well as self-employment you pay Class 1 on the salary and Class 4 on the profits. There are annual maximum rules that can cap the total, and they are not applied automatically in every case. If you have paid both in the same year it is worth having someone check whether you have overpaid.

Working it out

Our self-employed calculator gives you Income Tax and Class 4 together on whatever profit you enter, using this year's figures. That total, divided by twelve, is what should be leaving your account each month into a tax account — well before January makes the point for you.

Getting help with this

AJH Accountants handles national insurance for clients across the UK. We deal with HMRC, tell you what you can claim, and file on time, so nothing rests on you remembering a deadline. See how the service works, ask for a fixed-fee quote, or call the office on 01204 840303.

Originally published at ajhaccountant.co.uk/blog/national-insurance-self-employed-class-2-class-4.