How do you pay national insurance if you’re self-employed?
What are national insurance contributions?
National Insurance contributions are a tax on earnings which build your entitlement to certain state benefits, such as the State Pension and Maternity Allowance. Your national insurance payments go towards state benefits and services such as:
- the NHS
- the State Pension
- unemployment benefits
- sickness and disability allowances
How do I make national insurance contributions?
National insurance contributions (NICs) are made in your self assessment. This means that you pay it at the same time as you pay your income tax. You can pay via the HMRC website.
How much national insurance do I have to pay?
There are different classes of national insurance contribution (NICs) that you can make, depending on your profits. Self-employed people tend to pay class 2 and class 4. Sounds complicated but the essentials are:
Class 2 – if your profits are £6,205 or more (2018 – 19 tax year) you will need to pay class 2 NICs of £2.95 per week.
Class 4 – If your profits are £8,424 or more you will pay class 4 national insurance contributions. For the tax year 2018 – 19 you will pay 9% on profits between £8,424 and £46,350 and then 2% on any profits over £46,350.
Are there any exceptions?
Some professions are exempt from national insurance contributions, voluntary contributions can be made but are not compulsory. Examples of such professions are:
- examiners, moderators and invigilators
- businesses which deal with land or property
- Ministers of religion who aren’t paid a salary or stipend
Filling out a tax return
All of the above information will be entered on your self assessment tax return. This can be a daunting task so we are here to help. Contact us for advice or to book in for a free consultation.