Class 4 National Insurance is charged on the taxable profits of a self employed trade, profession or vocation: 6% on profits between £12,570 and £50,270 and 2% on profits above £50,270 for 2026 to 2027. It is worked out on the Self Assessment return and paid with Income Tax, including through payments on account. This guide covers how the profit figure is built and the rules that make Class 4 differ from tax.

What is Class 4 charged on?

Section 15(1) of the Social Security Contributions and Benefits Act 1992 charges Class 4 on profits that are immediately derived from carrying on a trade, profession or vocation, are chargeable to Income Tax under Chapter 2 of Part 2 of the Income Tax (Trading and Other Income) Act 2005 for the same year, and are not profits of a trade carried on wholly outside the UK.

That definition does a lot of work. HMRC’s National Insurance Manual at NIM24505 confirms that:

  • property income is not trading income, so a landlord’s rental profits do not attract Class 4;
  • post cessation receipts taxed under Chapter 18 of Part 2 of ITTOIA 2005 are outside Class 4.

Section 15(3A) and paragraph 4 of Schedule 2 apply Class 4 to each partner, including LLP members, on their own share of the partnership’s profits (NIM24520). HMRC’s view at NIM24523 is that sleeping partners are liable too, because the Act does not require a partner to be active.

What are the rates and limits for 2026 to 2027?

Section 15(3) sets the lower profits limit at £12,570 and the upper profits limit at £50,270, and section 15(3ZA) sets the main Class 4 percentage at 6% and the additional percentage at 2%. GOV.UK confirms the 2026 to 2027 rates as 6% on profits over £12,570 up to £50,270 and 2% on profits over £50,270.

Illustration only. A sole trader has Class 4 profits of £60,000 for 2026 to 2027.

Band Profits in band Rate Class 4
Up to £12,570 £12,570 0% £0
£12,570 to £50,270 £37,700 6% £2,262.00
Above £50,270 £9,730 2% £194.60
Total £2,456.60

Unlike employee Class 1, Class 4 is an annual calculation on the profits of the year, so the timing of income within the year makes no difference.

How does the Class 4 profit differ from the taxable profit?

NIM24605 explains that the starting point is the trading profit as computed for Income Tax, under paragraph 2 of Schedule 2 to the 1992 Act, with a limited number of adjustments set by paragraph 3:

  • No personal reliefs. Personal allowances do not reduce Class 4 profits; the lower profits limit does that job instead.
  • No pension relief. Personal pension contributions and retirement annuity premiums give Income Tax relief but are not deducted for Class 4.
  • Trade interest. Interest and annual payments incurred for the trade but not allowed in the trading profit can be deducted for Class 4. A partner’s interest on a loan put into the partnership’s business qualifies, but interest on a loan used to buy out another partner’s share does not.

How do losses work for Class 4?

Paragraph 3(1) of Schedule 2 relieves a trading loss for Class 4 in the same manner as for Income Tax under sections 64, 72, 83 and 89 of the Income Tax Act 2007. The catch is in NIM24610: when a loss is set against income that is not liable to Class 4, such as a salary, the Income Tax relief is used but no Class 4 relief has been given. That part of the loss is kept as a separate Class 4 loss and carried forward against future profits of the same trade, so the Class 4 losses carried forward can differ from the Income Tax figure.

Illustration only. An employee earning £30,000 starts a trade that makes an £8,000 loss in year 1 and sets it against the salary under section 64, using it all for Income Tax. In year 2 the trade makes £20,000. For Income Tax there is no loss left, but for Class 4 the £8,000 is still available, so Class 4 profits are £12,000. That is below £12,570, so no Class 4 is due. Without the separate Class 4 loss the bill would have been 6% of £7,430, which is £445.80.

See using a trading loss against other income for how the section 64 claim itself works.

Who does not pay Class 4?

NIM24510 and NIM24515 list the main exceptions:

  • people under 16 at the start of the tax year (regulation 93 of the Social Security (Contributions) Regulations 2001);
  • people over State Pension age at the start of the tax year (regulation 91(a)). Someone who reaches State Pension age during the year pays Class 4 for the whole of that year;
  • people not treated as UK resident for Income Tax (regulation 91(b));
  • trustees, executors and administrators on profits they receive in that capacity (paragraph 5 of Schedule 2).

The State Pension age rule often catches people out, so see also National Insurance over State Pension age.

How is Class 4 paid through Self Assessment?

Section 15(2) makes Class 4 payable in the same manner as Income Tax on the same profits, by the person charged, under Income Tax assessments. Section 16 applies the Income Tax Acts to it, including the payment rules in Part VA of the Taxes Management Act 1970 and the penalty regimes, so late payment interest and penalties work as they do for tax.

In practice the Class 4 figure appears on the Self Assessment calculation and is paid with the tax. GOV.UK confirms that payments on account include Class 4 for the self employed. Each payment on account is normally half of the previous year’s bill and is due by 31 January and 31 July, with any balancing payment due by 31 January after the end of the tax year. Payments on account are not needed if last year’s bill was under £1,000 or more than 80% of the tax was paid at source. See Self Assessment payments on account.

GOV.UK notes one exception: examiners, moderators, invigilators and people who set exam questions cannot pay Class 4 through Self Assessment and must contact HMRC to arrange payment.

Does Class 4 count towards the State Pension?

No. NIM24001 states that Class 4 does not count for contributory benefits or the State Pension. Entitlement for the self employed comes from Class 2. Under section 11 of the 1992 Act, someone whose Class 4 profits are at or above the small profits threshold, £7,105, is treated as having paid Class 2 for each week of self employment, without paying anything. Below that threshold they may pay voluntary Class 2 at £3.65 a week; see voluntary Class 2 contributions. For a wider overview, see self employed National Insurance.

What if you are employed as well?

Class 1 on a salary and Class 4 on profits are separate charges, and Class 4 deferment has not been available since 2015 to 2016 (NIM24004). Regulation 100 of the 2001 Regulations sets an annual Class 4 maximum for people liable to both. NIM24170 explains that it limits the total but always leaves at least the 2% additional rate on all profits above the lower profits limit. GOV.UK says HMRC tells you how much National Insurance is due after the return is filed. Worked numbers are in employed and self employed at the same time.

What mistakes come up most often?

  • Deducting personal pension contributions from Class 4 profits.
  • Losing the separate Class 4 loss when a trading loss has been used against a salary.
  • Leaving out trade interest that was not allowed in the accounts but is deductible for Class 4.
  • Charging Class 4 on rental profits, or missing it on a sleeping partner’s share.
  • Stopping Class 4 in the year State Pension age is reached instead of from the following year.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.