How is Class 4 National Insurance calculated for self-employed people in the UK?

Full answer

Class 4 National Insurance is the main NI contribution for self-employed people, charged on profits above the Lower Profits Limit. Rates for 2026/27: - Lower Profits Limit: £12,570 (aligned with the personal allowance) - Upper Profits Limit: £50,270 - Rate between £12,570 and £50,270: 6% - Rate above £50,270: 2% Note: The Class 4 rate was reduced from 9% to 8% from January 2024, and then to 6% from April 2024. Confirm the current rate for 2026/27 via HMRC as rates are subject to Budget changes. How Class 4 is calculated: - Class 4 NI is calculated on net profit (turnover minus allowable business expenses) as reported on the Self Assessment return. - Allowable expenses include: business mileage, office costs, staff costs, professional fees, advertising, etc. - Class 4 is reported on the Self Assessment return and paid by 31 January (with income tax). Class 2 abolition: - Class 2 NI (previously £3.45/week flat rate for self-employed) was abolished from 6 April 2024. - Self-employed people with profits above the Lower Profits Limit now automatically accrue qualifying years for State Pension and contributory benefits through Class 4. - Self-employed with profits below the Small Profits Threshold (£6,725 for 2024/25) do not pay NI but can pay Class 3 voluntary contributions to protect their State Pension. Difference from employed NI: - Employees pay Class 1 NI (8%/2% for 2026/27) deducted via PAYE. - Employers pay employer NI on top (13.8% increasing to 15% from April 2025). - Self-employed pay Class 4 only -- no employer NI -- making self-employment NI cheaper than equivalent employed earnings.

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• Uk Self Employed Class 4 Ni Guide 2026
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