Comparison · National Insurance · 2026/27
Class 1 Employee NI vs Class 4 Self-Employed NI: Full 2026/27 Comparison
Employees and the self-employed pay National Insurance under different classes, at different rates, on the same thresholds. This guide compares Class 1 and Class 4 NI for 2026/27, with worked examples showing exactly how much less the self-employed pay on identical income.
TL;DR -- 2026/27 National Insurance Key Figures
- • Class 1 (employee): 8% on £12,570–£50,270, then 2% above
- • Class 4 (self-employed): 6% on £12,570–£50,270, then 2% above
- • Class 1 employer (secondary): 15% above the £5,000 secondary threshold
- • Class 2: abolished for most self-employed from April 2024; voluntary rate £3.65/week
Class 1 vs Class 4: Head-to-Head
| Feature | Class 1 (Employee) | Class 4 (Self-Employed) |
|---|---|---|
| Lower threshold | £12,570 (primary threshold) | £12,570 (lower profits limit) |
| Upper threshold | £50,270 (upper earnings limit) | £50,270 (upper profits limit) |
| Main rate | 8% | 6% |
| Rate above upper threshold | 2% | 2% |
| Collected via | PAYE (deducted by employer) | Self Assessment (payments on account) |
| Employer contribution | 15% above £5,000 (paid by employer) | None -- no employer |
Worked Example: £45,000 Income
Comparing an employee earning £45,000 salary with a self-employed sole trader making £45,000 profit, using 2026/27 thresholds.
| Calculation | Employee (Class 1) | Self-Employed (Class 4) |
|---|---|---|
| NIable amount (£45,000 - £12,570) | £32,430 | £32,430 |
| NI due | 8% x £32,430 = £2,594.40 | 6% x £32,430 = £1,945.80 |
| Difference | Self-employed pays £648.60 less NI on the same £45,000 income | |
This example only covers the employee/self-employed side of the comparison. It does not include employer Class 1 secondary NI (15% above £5,000), which the employer pays separately on top of the employee's £45,000 salary and does not reduce the employee's take-home pay directly.
Frequently Asked Questions
Frequently Asked Questions
What is the difference between Class 1 and Class 4 National Insurance?
Class 1 is paid by employees through PAYE: 8% on earnings between £12,570 and £50,270, then 2% above. Class 4 is paid by the self-employed through Self Assessment: 6% on profits between £12,570 and £50,270, then 2% above -- a lower main rate than employees pay on the same income (2026/27 figures).
Why do the self-employed pay a lower main rate of NI?
Class 4 (6%) is set below Class 1 (8%) partly to reflect the narrower range of contributory benefits self-employment unlocks and the absence of an employer paying secondary NI on their behalf. The gap has narrowed since Class 2 (the old flat-rate self-employed contribution) was abolished for most people from April 2024.
Does Class 4 NI count towards the State Pension?
Not directly -- qualifying years come from Class 2, which is now treated as paid for profits at or above the £7,105 small profits threshold. Below that, self-employed people can pay voluntary Class 2 (or Class 3) contributions to protect their State Pension record.
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What is the employer secondary threshold and does it affect the self-employed?
The £5,000 (2026/27) employer secondary threshold triggers 15% employer Class 1 NI above that point on an employee's earnings. It does not apply to the self-employed directly, but it strongly influences how limited company contractors structure salary vs dividends.
Do employees or the self-employed pay more total NI on the same income?
On identical gross income, an employee generally pays more Class 1 NI (8% main rate) than a self-employed person pays in Class 4 (6% main rate). This ignores employer secondary NI (15% above £5,000), which is paid by the employer, not deducted from take-home pay.
How does Class 4 NI interact with income tax for the self-employed?
Class 4 NI uses the same trading profit figure as income tax (after expenses and capital allowances) but has its own thresholds. Both are reported and paid together via Self Assessment, typically through payments on account in January and July.
Are the Class 1 and Class 4 thresholds the same?
Yes -- for 2026/27 the Class 1 primary threshold and Class 4 lower profits limit are both £12,570, and the Class 1 upper earnings limit and Class 4 upper profits limit are both £50,270. Only the percentage rates differ.
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Disclaimer: This comparison is for general information based on 2026/27 National Insurance rates and thresholds published by HMRC. Individual circumstances vary -- consult an accountant or HMRC directly for advice specific to your situation.