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Self-employed National Insurance

If you are in business as a sole trader or in a partnership, you are liable for self-employed National Insurance (NI) contributions. That generally means paying flat-rate Class 2 NI and profit-related Class 4 NI.

Paying self-employed National Insurance contributions

You register to pay self-employed National Insurance contributions (NICs) as part of registering for tax self-assessment.

Class 4 NI contributions are due at the same time as income tax payments collected through self-assessment — twice a year, by 31 January and 31 July.

Class 2 NICs are due at the same dates. You can opt to pay by monthly direct debit if you prefer to spread the payments.

You do not have to make Class 4 or Class 2 NICs if you are under 16 or have reached state pension age.

Class 4 NI

Class 4 NI contributions are based on your level of profits. You do not have to pay any Class 4 NI if your profits are below £7,956 (2014/15). You pay 9% Class 4 NI on profits from £7,956 to £41,865, and 2% on profits above that.

If you have more than one business, special rules can apply to the calculation of Class 4 NI contributions in some circumstances — for example, if one of your businesses makes a loss.

Class 2 NI

Class 2 NI contributions are charged at a flat weekly rate (£2.75 a week, 2014/15) and affect your entitlement to some benefits, such as the state pension.

You can apply for exemption from Class 2 NICs if your self-employment earnings are small.