What is Class 4 National Insurance?

Class 4 National Insurance is for self-employed people with annual profits over £9,569.

But to really understand Class 4 National Insurance, it’s worth learning about the other National Insurance classes, and who pays them.

Class 4 National Insurance is for self employed people with profits over £9,569

What Are The Different Types of National Insurance?

Two National Insurance classes are for employees – those who work for an employer and receive a salary:

  • Class 1 National Insurance – This is for employees under State Pension age who earn more than £184 a week. Employers automatically deduct Class 1 National Insurance contributions from your salary.
  • Class 1A or 1B National Insurance – If employees claim any expenses or receive any benefits, their employers must pay Class 1A or 1B National Insurance contributions on any amount they receive.

Two other National Insurance classes are for self-employed people, and the type you’ll pay depends entirely on your annual profits:

  • Class 2 National Insurance – You must pay this if you’re self-employed and you earn profits of £6,515 or more a year.
  • Class 4 National Insurance – For self-employed people with annual profits over £9,569.

That just leaves Class 3 National Insurance. These are voluntary contributions that anyone can pay to either fill or avoid gaps in their National Insurance record. For example, self-employed people who earn less than £6,515 a year might choose to make voluntary contributions to avoid a gap in their record.

How Much Are Class 4 National Insurance Contributions?

The rates for National Insurance Contributions tend to change every year.  In 2021 to 2022, the rates for Class 4 National Insurance Contributions are 9% on any profits you make between £9,569 and £50,270, and 2% on any profits you make over £50,270.

You can see the most up-to-date information and advice on National Insurance rates on the government’s website.

How to Pay Class 4 National Insurance Contributions

The majority of self-employed people pay their Class 4 National Insurance Contributions through self-assessment. When you submit your tax return, if your profits go over the threshold, then HMRC will automatically work out how much National Insurance you’ll have to pay.

They’ll add it to your overall tax bill, so you can pay it at the same time as you pay the rest of your tax.

You can join the self-assessment scheme when you register as self-employed. ]Read our guide to registering as self-employed.

Who is exempt from Class 4 National Insurance?

But certain types of self-employed people don’t pay National Insurance through self-assessment. These include:

  • People involved in exams, such as moderators and invigilators.
  • Anyone who runs a business that involves land or property.
  • Religious ministers who don’t receive salaries or stipends.
  • Investors who don’t make investments as a business, and who therefore do not get fees or commissions.

If you don’t pay National Insurance through self-assessment, you can instead make a voluntary contribution. Head here for the government guide to voluntary National Insurance contributions.

We also have a guide to Class 2 National Insurance contributions for self-employed people.

Your Needs as a Self-Employed Freelancer or Contractor

So long as you take all the necessary steps to register your business, and so long as you keep good records, you shouldn’t have any problems with National Insurance Contributions.

But even so, it’s a good idea to get insurance as a self-employed freelancer or contractor. This can provide an essential safety net for many of the problems that self-employed workers face, from unpaid invoices to tax disputes.

We offer specialist insurance policies for freelancers and contractors. Our tailored insurance policies cost as little as 35p a day, and they’ll cover you for many of the additional risks that freelancers and contractors face.

If you have any questions or would like to discuss your options please contact our Tapoly team at info@tapoly.com, call our helpline on +44(0)2078 460 108 or try our chat on our website.