Self-employed individuals make National Insurance contributions differently than employees. You’ll usually pay National Insurance once a year through Self Assessment. The deadline for Self Assessment is 31st January each year. You can choose to pay your bill all at once or in monthly instalments. If you earn over a certain amount, you’ll need to make Class 2 National Insurance contributions. You’ll pay these contributions via your Self Assessment tax return. You’ll also need to pay Class 4 National Insurance contributions if your profits are over a certain amount. These contributions are also paid through Self Assessment. The amount of National Insurance you pay depends on your profits. The more you earn, the more you’ll pay.
Frequency of National Insurance Payments
Self-employed individuals in the UK are required to make National Insurance (NI) contributions to cover their entitlement to certain benefits, such as the State Pension and Statutory Sick Pay. The frequency of these payments depends on the specific way in which self-employed income is reported and paid.
- Class 2 NI: Paid weekly or monthly as part of the Self-Assessment tax system. It covers basic entitlement to benefits.
- Class 4 NI: Paid annually along with income tax due on self-employed profits. It’s an additional contribution based on profits above a certain threshold.
| Payment Method | Frequency |
|---|---|
| Class 2 NI | Weekly or monthly |
| Class 4 NI | Annually |
Self-Employment Earnings Threshold
As a self-employed person in the UK, your National Insurance contributions depend on how much you earn each year. There is a specific threshold below which you don’t need to make these payments.
For the 2023/24 tax year, the Self-Employment Earnings Threshold is £12,570. This means that if your self-employment profits are below this amount, you don’t have to pay National Insurance.
If your profits are above the threshold, you will need to pay Class 2 National Insurance contributions at a rate of £3.05 per week. This covers you for certain benefits, such as the State Pension and access to NHS services.
Once your profits reach a certain level, you will also need to pay Class 4 National Insurance contributions. These are calculated as a percentage of your profits, with different rates for different income levels.
Here is a table summarising the Self-Employment Earnings Threshold and National Insurance contribution rates for the 2023/24 tax year:
| Income | Class 2 NI | Class 4 NI |
|---|---|---|
| Below £12,570 | £0 | £0 |
| Between £12,570 and £50,270 | £3.05 per week | 0% |
| Between £50,270 and £150,000 | £3.05 per week | 10.25% |
| Over £150,000 | £3.05 per week | 10.25% |
When Do Self-Employed Individuals Pay National Insurance?
Self-employed individuals in the United Kingdom are required to pay National Insurance contributions twice a year. The due dates for these contributions are:
- 31st January: Payment for the previous tax year (April 6th – April 5th)
- 31st July: Payment for the first half of the current tax year (April 6th – October 5th)
Calculating and Reporting National Insurance Contributions
The amount of National Insurance contributions you need to pay depends on your profits. You can calculate your contributions using the following steps:
1. Calculate your total profits for the tax year.
2. Deduct any allowable expenses from your profits.
3. Calculate 9% of your net profits (after expenses).
4. Multiply this amount by 12 to get your annual National Insurance contribution.
You can report and pay your National Insurance contributions online through the HMRC website.
Table: National Insurance Contribution Rates
| Class of Contribution | Rate |
|---|---|
| Class 2 | £3.05 per week |
| Class 4 | 9% on profits between £9,568 and £50,270 |
| Class 4 | 2% on profits over £50,270 |
How Often Do You Pay National Insurance When Self-Employed?
As a self-employed individual, you are responsible for paying National Insurance (NI) on your earnings. The frequency of your NI payments will depend on your payment method and income level.
Class 2 NI: If your annual profits are between £6,570 and £11,908, you will pay a flat-rate Class 2 NI of £3.05 per week through the Self-Assessment tax return.
Class 4 NI: If your annual profits exceed £11,908, you will pay Class 4 NI on your profits over this threshold. The rate for Class 4 NI is 9% or 2% (for profits between £50,000 and £150,000), and these payments are made through the Self-Assessment tax return.
Self-Assessment Tax Return Deadlines: The Self-Assessment tax return deadline is typically January 31st each year, and all NI payments must be made by this date.
- If you pay by Direct Debit, you can set up a monthly payment plan or pay the full amount on January 31st.
- If you pay online or by phone, you will need to make a lump sum payment by January 31st.
- If you pay by post, your payment must be postmarked by January 31st.
Penalties for Late Payments
If you fail to pay your NI contributions on time, you may face penalties and interest charges. The penalties are calculated as follows:
| Late Payment | Penalty |
|---|---|
| First late payment | 10% of the unpaid tax that remains unpaid after 30 days |
| Second late payment | 20% of the unpaid tax that remains unpaid after 6 months |
| Third and subsequent late payments | 30% of the unpaid tax that remains unpaid after 12 months |
Interest charges will also apply on any unpaid NI, and they are calculated daily from the payment due date. The interest rate is currently set at 3% above the Bank of England base rate.
To avoid penalties and interest charges, it is crucial to pay your NI contributions on time. Consider setting up a payment plan or using a reminder system to ensure timely payments.