Paying National Insurance when self-employed [how-to]
If you’re self-employed, you may know that the guidance around what you need to pay and when can be a little spotty. You may have been caught off guard at the realisation that you have to pay National Insurance on top of your income tax – when you’re employed traditionally this is all handled for you. If you are self-employed and you’re wondering about how and when to pay your National Insurance Contribution (NIC), all you have to do is keep reading for your easy guide.
What National Insurance Contribution do I need to pay?
There are two varieties of National Insurance that you could be eligible to pay. These are Class 2 and Class 4 NIC. If you are self-employed and you are earning sufficient profits, then you should be paying some sort of NIC. The question is, which type do you pay? Simply put…
- Pay Class 2 NIC if your profits are more than £11,908 per year
- Pay Class 4 NIC if your profits are £11,909 or more per year
Class 2 National Insurance Contribution
Class 2 NIC could apply to you if you have self employed income, but also any additional income that relates to a business activity. For example, this could be property letting. There are certain thresholds to consider when wondering whether to pay Class 2 NIC. If your profits are below the Small Profits Threshold (£6725 in 2022/2023), you can pay voluntary Class 2 NIC. You may decide to pay voluntary NIC if you’re close to the State Pension age and you would like to benefit as much as possible, or if you are self-employed and you have low profits. If your profits exceed the Lower Profits Limit (£11,908 in 2022/2023) you will have to pay Class 2 on a mandatory basis. If your profit falls between these two figures, there is no Class 2 NIC to pay.
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How much is Class 2 NIC?
Paying Class 2 NIC is a fixed weekly amount. In the tax year of 2022/2023, this weekly amount is £3.15. This has to be paid for the amount of time you are self-employed for in a tax year.
Class 4 National Insurance Contribution
Class 4 NIC is something you are liable to pay if your profits are more than the Lower Profits Limit (£11,908 for 2022/2023). There are two levels to Class 4 NIC, and your payment is calculated by a percentage.
- If your profit exceeds £11,908, you will have to pay 9.73% of your profits to NI.
- Additional profit exceeding £50,270 will be charged for NI at 2.73%.
When does my National Insurance have to be paid?
Your National Insurance Contribution should be paid at the same time as your self-assessment, for which the deadline is 31st January every year. Doing this at the same time as your self-assessment will allow you to have peace of mind that all your payments are up to date for the tax year.
Working with an accountant for your NIC
Working with an accountant to calculate and pay your National Insurance Contribution could make your life so much easier. This will take the stress of calculating how much to pay out of your hands, ensuring that the figures are correct.
Our accounting team at Adams Accountancy is precise and experienced. We can help you calculate anything you need in relation to being self-employed, and we also provide personal accounting services. Get in touch with us on 01322 250 001 or email info@adams-accountancy.co.uk.
