If you’re both employed and self-employed, you need to pay National Insurance (NI) on both your income sources. As an employee, your NI contributions are deducted from your salary or wages by your employer, while as a self-employed person, you’re responsible for paying your own NI contributions through your Self-Assessment tax return. The amount of NI you pay depends on your earnings from both sources, and you’ll need to consider Class 1 NI for your employment income and Class 2 or Class 4 NI for your self-employment income. Make sure you keep track of your income and expenses to ensure you’re paying the correct amount of NI and avoiding any potential penalties.
Combined Earnings and Contributions
If you are employed and self-employed, National Insurance contributions are based on your combined earnings from both sources. Once your combined earnings reach a certain threshold, known as the “Primary Threshold”, you will pay Class 1 National Insurance on your earnings from both employments. The Primary Threshold for 2023/24 is £12,570.
The table below shows the different National Insurance rates and thresholds for 2023/24:
| Contribution type | Earnings threshold | Rate |
|---|---|---|
| Class 1 | £12,570 – £50,270 | 13.25% |
| Class 1 | Over £50,270 | 3.25% |
| Class 4 (self-employed) | £12,570 – £50,270 | 10.25% |
| Class 4 (self-employed) | Over £50,270 | 2.55% |
For example, if you earn £20,000 from employment and £10,000 from self-employment, your combined earnings are £30,000. This means you will pay Class 1 National Insurance on your employment earnings of £20,000 and Class 4 National Insurance on your self-employment earnings of £10,000.
National Insurance Thresholds
National Insurance is a tax that employees and self-employed workers pay towards the funding of the UK state pension and other benefits. It is payable on earnings above a certain threshold which are as follows:
- 2022-23 tax year: £9,880
- 2023-24 tax year: £12,570
For employees, National Insurance is deducted from wages and salaries before tax. For self-employed workers, it must be paid separately. There are different rates of National Insurance for employees and the self-employed.
Employees
Income Employee National Insurance Rate £0-£9,880 0% £9,881-£50,270 13.25% £50,271-£150,000 3.25% In addition, employees also pay 1.25% for Social Care Levy on incomes over £9,880.
Self-Employed
Income Class 2 National Insurance Rate Class 4 National Insurance Rate £0-£9,880 £3.15 per week 0% From £9,881 £3.15 per week 9% on profits between £9,881-£50,270
2% on profits over £50,270National Insurance Contributions for Employed and Self-Employed Individuals
Individuals who earn income from employment or self-employment may be required to pay National Insurance (NI) contributions. The amount of NI you pay depends on your employment status and the level of your earnings.
Class 1 Contributions
- Paid by employees on their earnings above the Primary Threshold (PT).
- Deducted from your salary by your employer.
- Rates vary depending on your age and income.
Class 4 Contributions
- Paid by self-employed individuals on their annual profits above the Small Profits Threshold (SPT).
- Due by 31st January each year.
- Rates are fixed and depend on your level of profits.
The table below summarizes the key differences between Class 1 and Class 4 NI contributions:
Type Paid by Income threshold Due date Rates Class 1 Employees Primary Threshold Deducted monthly Varies Class 4 Self-employed Small Profits Threshold 31st January annually Fixed Tax Relief and Deductions
If you are employed and self-employed, you may be eligible for certain tax reliefs and deductions that can reduce your National Insurance contributions.
Tax Reliefs
- Personal allowance: This is a tax-free allowance that you can earn before you start paying income tax. The personal allowance for 2022/23 is £12,570.
- Trading allowance: This is a tax relief of up to £1,000 that you can claim if you are self-employed and your trading profits are less than £10,000.
Deductions
- Business expenses: You can deduct the cost of any expenses that you incur in the course of your self-employment from your trading profits. This includes things like the cost of equipment, supplies, travel, and marketing.
- Capital allowances: You can also claim capital allowances for the cost of certain assets that you use in your business, such as computers and equipment.
Type of Relief/Deduction Amount Personal allowance £12,570 Trading allowance Up to £1,000 Business expenses Varies Capital allowances Varies Cheers for reading, folks! I hope this helped clear up any confusion surrounding National Insurance for the employed and self-employed. Remember, the rules can be a bit tricky, so if you’re still unsure about how much you should be paying, don’t hesitate to reach out to HMRC or a tax professional. Thanks again for stopping by, and be sure to visit us again soon for more money-related info and banter. Until next time!