What is National Insurance? A guide to self-employed rates and thresholds
What is National Insurance?
National Insurance contributions (NICs) are a tax on earnings paid by the UK public. National Insurance qualifies you for benefits, including your state pension and certain support allowances.
National Insurance is broken down into different ‘classes’. The class you pay depends on your employment status:
- employees earning more than £242 a week and under the state pension age pay Class 1 contributions, which are deducted by the employer.
- self-employed people pay National Insurance in two classes, Class 2 and Class 4 (with a few exceptions).
- if you employ people, you pay secondary Class 1 contributions on your employees’ earnings.
How do I pay National Insurance?
Most self-employed people pay National Insurance through their annual Self Assessment tax return. The deadline to file your return and pay your bill is 31 January each year.
This means you pay National Insurance in arrears. We list the rates and thresholds for both the current and the previous tax year below.
Some self-employed people might pay National Insurance differently:
- you won’t pay NICs if you’re under 16, or over the state pension age (unless you pay Class 4 NICs, which you stop paying at the end of the tax year in which you reach state pension age)
- you won’t have to pay Class 2 NICs if you’re a married woman who opted into the Reduced Rate scheme before it ended in April 1977
- separate rules apply to share fishermen and volunteer development workers
Some self-employed people don’t pay National Insurance contributions through Self Assessment, but they may choose to make voluntary contributions. These workers include:
- examiners, moderators, and invigilators
- religious ministers, providing that they receive no salary or stipend
- people who make investments, but without receiving a commission or fee, and not as a business
- some people whose business involves land or property
Self-employed National Insurance rates
Class 2 and Class 4 National Insurance is charged at different rates.
Class 2 National Insurance contributions are fixed at £3.15 a week and it’s only charged if your annual profits are £6,725 or more.
Class 4 National Insurance contributions are only charged if your profits are above £11,908 a year.
The rate is nine per cent on profits between £11,908 and £50,270 and two per cent on profits over £50,270.
The rates for 2022-23 below are ‘hybrid’ rates that reflect the National Insurance increase that was in place from July to November 2022.
What is Class 2 National Insurance?
|Class 2 NICs||2022-23||2021-22|
|Small profits threshold||£6,725||£6,515|
What is Class 4 National Insurance?
|Class 4 NICs||2022-23||2021-22|
|Self-employed people start paying above||£11,908||£9,568|
|A lower rate above||£50,270||£50,270|
|Rate above £50,000||2.73%||2%|
The government increased National Insurance by 1.25 percentage points in 2022-23, to help pay for health and social care.
Voluntary National Insurance self-employed contributions
You can choose to make voluntary National Insurance contributions. You might do this if there are gaps in your National Insurance record that could affect your entitlement to the state pension, or if you had small profits during periods of self-employment.
If you’re concerned that there may be gaps in your National Insurance record, you should ask for a copy using the gov.uk tool. You can then check whether you’re eligible to make voluntary contributions.
How can I get a National Insurance refund?
If you think you’ve overpaid your National Insurance or shouldn’t have paid it at all, you can claim a refund from HMRC.
Self-employed people are more likely to overpay National Insurance because their employment circumstances are more complicated than employed people paid through Pay As You Earn (PAYE).
HMRC doesn’t check the accuracy of the NICs you make, so it’s important for you to check that you’re not overpaying and apply for a refund if you’re due one.
For example, a self-employed person could be overpaying NICs if their profits were under the Small Profits Threshold or if they have several jobs, meaning they’re employed and self-employed at the same time.
When you request a National Insurance tax refund through the Gov.uk website, you’ll be asked which class of NICs you want refunded (Class 1, Class 2, Class 3, or Class 4).
You can work out what NICs you need to pay and what you could be owed by using a National Insurance refund calculator.
Claiming a Class 2 refund
If you want to claim a refund for Class 2 contributions that you don’t think you should have paid, you’ll need to fill out a CA8480 form.
If you think you’ve paid too much Class 2 National Insurance, you’ll need to write to HMRC with your National Insurance number, why you think you’ve overpaid, the tax year you’re claiming for, and a copy of your earnings.
Claiming a Class 4 refund
If you want a repayment of Class 4 contributions that you don’t think you should have paid, you’ll need to contact the Self Assessment Helpline within five years of the tax year you want a refund for.
If you think you’ve paid too much Class 4 National Insurance, you’ll need to fill out a CA5610 form from 1 February in the tax year after the one you’re claiming for.
What National Insurance contributions do employers make?
On behalf of your employees, you deduct 12 per cent from their pay on earnings between the primary threshold (£1,048 monthly or £242 weekly) and the upper earnings limit (£4,189 monthly or £967 weekly).
You deduct two per cent on pay above the upper earnings limit.
These are your employees’ Class 1 National Insurance contributions.
Employers pay contributions towards their employees’ National Insurance (these are known as secondary contributions).
This is at 13.8 per cent above the secondary threshold (which is £758 monthly or £175 weekly).
Make sure you claim the employment allowance, which reduces your annual National Insurance liability by £5,000 a year.