national-insurance

 


National insurance (NI) is a tax you pay on any earnings and income when you start work. The national insurance contributions you make help to pay for things like state benefits, statutory sick pay, maternity leave, and various other employment benefits.   

 

What is a National Insurance number?

 

Your NI number is your own unique personal account number. Everybody is given one and it stays the same throughout your life.

 

Your national insurance contributions and any income tax you pay will be linked to this number, which will be your reference number when communicating with HMRC.



Who pays National Insurance?

 

You pay NI whether you are self-employed or not, so long as you are at least 16 years old, work in the UK and are either:

 

  • An employee earning more than £162 per week
  • Self-employed and making a profit of at least £6,205 per year




How do I apply for a National Insurance number?

 

If you are from the UK, you will receive a national insurance number automatically before you turn 16. If you move to the UK from elsewhere, you may have a number allocated to you with your residence permit.

 

In either case, if you do not receive your NI number, you’ll need to call the national insurance helpline.



Making National Insurance Contributions as a sole trader

 

If you are employed, it is your employer’s responsibility to pay over any NI contributions each month.

 

When you make the decision to work for yourself, you will need to register as a sole trader. From there, you will pay the right amount of NI at the end of the year the self assessment process. 

 

Class 2 National Insurance Contributions (NICs)

If the profit you make as a sole trader at the end of the year is more than £6,205, you’ll need to pay Class 2 contributions.

 

You will pay £2.95 per week for your Class 2 NICs, which are paid over at the end of each year to HMRC through your Self Assessment. Therefore, you will pay £153.40 in total.

 

Class 4 National Insurance Contributions

 

If the profit you make as a sole trader at the end of the year is more than £8,424, you’ll need to Class 4 contributions.

 

You will pay 9% on any profits between £8,424 and £46,350 and 2% on profits over £46,350.

 

The amount you pay for your Class 4 NICs will be calculated at the end of each year as part of your Self Assessment, though you’ll usually pay the amount due to HMRC every six months as part of what is know as ‘payment on account’.

 

What National Insurance contributions do I have to make if I’m self-employed

 

If you’re self-employed, you’ll pay Class 2 National Insurance Contributions (NICs), so long as you have had at least £6,205 in profit. You will also need to pay Class 4 NICs on anything above £8,164.



Profit Band

Payment

National Insurance Class

Less than £6,205

£0.00 or voluntary class 2 payment of £2.95 per week

None / Class 2

£6,205 - £8,423

£2.95

Class 2

£8,424 - £46,350

9%

Class 4

Over £46,350

2%

Class 4



When do I need to pay national insurance if I’m self-employed?

 

If you pay your tax through ‘payments on account’, then you will pay your Class 4 NICs at the same time. If not, your Class 2 and Class 4 NICs will be paid as part of the payment due on 31 January after the tax year ends.

 

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