If you are self employed as a sole trader or a partner, you pay Class 4 National Insurance through Self Assessment at 6% on profits between £12,570 and £50,270, and 2% on any profits above £50,270, for both the 2025/26 and 2026/27 tax years. Class 2 National Insurance no longer has to be paid, and most self employed people receive a National Insurance credit automatically that protects their State Pension record. This guide explains how the two classes work and how they are collected.
National Insurance is often the part of a self employed tax bill that causes the most confusion, partly because the rules changed significantly from April 2024. As a sole trader or a member of a partnership, your contributions are worked out on your taxable profits rather than your turnover, and they sit alongside your Income Tax on the same Self Assessment return. Understanding what you actually owe, and what you get in return, makes it far easier to budget for each January payment.
How much Class 4 National Insurance do the self employed pay?
Class 4 is the main National Insurance contribution for sole traders and partners. It is charged on your profits above the lower profits limit of £12,570 a year. For both the 2025/26 and 2026/27 tax years the rates are the same. You pay 6% on the slice of profits between £12,570 and £50,270, and 2% on any profits above £50,270. There is no upper cap on the 2% band, so higher earners keep paying that additional rate on everything over the upper limit.
As a worked example, a sole trader with £40,000 of taxable profit in 2025/26 pays Class 4 on £27,430 (the amount above £12,570) at 6%, which comes to roughly £1,646. A trader with £70,000 of profit pays 6% on the band up to £50,270 and then 2% on the remaining £19,730, adding around £2,657 in total. Because Class 4 is based on profit, keeping accurate records and claiming everything you are entitled to matters. Our guide to allowable business expenses explains which costs reduce the profit figure your National Insurance is calculated on.
Do I still have to pay Class 2 National Insurance?
No. From 6 April 2024, self employed people with profits at or above the small profits threshold no longer have to pay Class 2 National Insurance. Crucially, you are still treated as having paid it. That means you continue to build up your entitlement to the State Pension and certain other benefits without any contribution leaving your bank account. HMRC applies this National Insurance credit automatically through your Self Assessment return, so there is nothing extra to claim.
This is a genuine saving compared with the old system, where Class 2 was a flat weekly charge on top of Class 4. The protection to your record is unchanged, which is the key point for anyone worried about qualifying years towards their pension.
What if my profits are below the small profits threshold?
The position is different for lower earners. If your profits are below the small profits threshold, which is £6,845 for 2025/26 and rises to £7,105 for 2026/27, you do not get the automatic credit. You can, however, choose to pay Class 2 voluntarily to keep your National Insurance record complete. The voluntary weekly rate is £3.50 for 2025/26 and £3.65 for 2026/27, which works out at roughly £182 for a full year in 2025/26. For many people that is a cheap way to secure a qualifying year towards the State Pension, and it is usually far better value than paying the higher Class 3 voluntary rate later to fill the same gap.
How is self employed National Insurance collected?
Class 4 National Insurance is collected through Self Assessment alongside your Income Tax. You do not receive a separate National Insurance bill. Instead, HMRC works out the amount from the profit figures on your tax return, and it forms part of the single balancing payment due by 31 January after the end of the tax year. If you also pay towards next year in advance, your National Insurance can be included in your payments on account, so it is worth checking how those instalments are made up. Any voluntary Class 2 you decide to pay is normally settled through the same return.
How is this different from an employee’s National Insurance?
Employees pay Class 1 National Insurance, which their employer deducts from wages through PAYE before they are paid, and the employer pays a further secondary contribution on top. As a sole trader or partner you have no employer, so you pay Class 4 yourself on your profits and settle it once a year rather than every payday. The rates and thresholds also differ, and Class 4 does not count towards contribution based benefits in exactly the same way Class 1 does. If you are weighing up whether to trade as a sole trader or through a company, the National Insurance treatment is one of several factors covered in our comparison of a sole trader versus a limited company. For the full range of tax topics, our accountancy and tax guide brings the guides together in one place.
HMRC enquiries into self employed returns are common, and the way Class 4 profits are calculated is a frequent area of challenge. A Solar Protect tax investigation insurance policy covers up to £100,000 of your accountant’s professional fees in defending an enquiry, with no excess to pay. Get a quote to protect your business today.
Reviewed by Matthew Bartlett, Director, Solar Protect. This guide is general information, not personalised tax or financial advice. Figures are correct for the 2025/26 and 2026/27 UK tax years at the time of writing.