An Introduction to National Insurance for the Self-Employed

  • Price: £3.60
  • Published: March 2017
  • Type: Business Information Factsheet
  • Format: PDF

National Insurance (NI) is a system of contributions paid by both employed and self-employed people (trading as sole traders or partnerships) that qualifies them for certain state benefits and pensions such as the State Pension, Maternity Allowance and Incapacity Benefit.

Employed and self-employed individuals pay different types of NI contributions, which qualify them for different benefits. The amount of NI paid by self-employed people varies according to how much profit they make. Some individuals (whether employed or self-employed) also choose to pay voluntary NICs, for example to protect their State Pension if they have not otherwise made enough contributions.

NI is paid to HM Revenue & Customs (HMRC), which tracks contribution records via NI numbers.

Most self-employed people are required to pay flat-rate weekly Class 2 NICs (subject to certain exemptions), and some are also required to pay Class 4 NICs, depending on the level of their profits.

This factsheet provides an explanation of the NI classes that are relevant for self-employed people, including anyone who chooses to make voluntary contributions, and covers who has to pay NICs, how and when. It also explains the various financial thresholds relating to the payment of NICs, how Class 4 NI is calculated, and the special rules that apply to people who have earnings from both employment and self-employment or who are running more than one business.

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