how to pay national insurance when self-employed

by Emmanuel McLaughlin Published 1 year ago Updated 1 year ago

Most people will pay their NICs through self-assessment – a system HM Revenue and Customs (HMRC) uses to collect Income Tax. You must tell HMRC when you become self-employed as a sole trader or partnership and register for self-assessment and Class 2 National Insurance as soon as you start your business.

Full Answer

Do I pay national insurance if I am self-employed?

Some self-employed people do not pay National Insurance through Self Assessment, but may want to pay voluntary contributions. These are: people who make investments for themselves or others - but not as a business and without getting a fee or commission

How do I pay self-employed National Insurance by direct debit?

Use form CA5601 to arrange to pay self-employed National Insurance contributions by Direct Debit. This only applies if you have a specific job. You can download this form, fill it in and send it to HMRC using the address on the form.

How do I arrange to pay self-employed voluntary National Insurance?

Use form CA5601 to arrange to pay self-employed National Insurance contributions by Direct Debit. This only applies if you have a specific job. If you live abroad and pay self-employed voluntary National Insurance, fill in the form at the end of leaflet N138.

How do I get health insurance if I'm self-employed?

Health coverage if you're self-employed. If you're self-employed, you can use the individual Health Insurance Marketplace to enroll in flexible, high-quality health coverage that works well for people who run their own businesses. You’re considered self-employed if you have a business that takes in income but doesn’t have any employees.


Can I pay my own NI contributions?

You must be eligible to pay voluntary National Insurance contributions for the time that the contributions cover. You can usually only pay for gaps in your National Insurance record from the past 6 years. You can sometimes pay for gaps from more than 6 years ago depending on your age.

How do I pay my NI to HMRC?

Make sure your payment reaches HMRC by the deadline....You can make same or next day payments:by approving a payment through your online bank online or telephone banking (Faster Payments)by your bank or building society.

What happens if I don't pay National Insurance contributions?

Your National Insurance Contributions give you access to some benefits including a retirement pension. Thus, if you're not paying your National Insurance contributions you'll end up with gaps in your NI record, and won't be able to qualify for some benefits.

Is it worth making voluntary NI contributions?

Voluntary National Insurance contributions can help make sure you have enough qualifying years to get the full State Pension. If you have gaps in your record, you might be able to make voluntary contributions to fill them.

How do I pay voluntary NI contributions to HMRC?

Contact HM Revenue and Customs ( HMRC ) if you want to: pay quarterly - they'll send you a bill every July, October, January and April....You can make same or next day payments:by approving a payment through your online bank online or telephone your bank or building society.

Can I pay missed years NI contributions?

You can usually pay voluntary contributions for the past 6 years. The deadline is 5 April each year. You have until 5 April 2022 to make up for gaps for the tax year 2015 to 2016. You can sometimes pay for gaps from more than 6 years ago, depending on your age.

How do you pay National Insurance?

You pay National Insurance with your tax. Your employer will take it from your wages before you get paid. Your payslip will show your contributions. If you're a director of a limited company, you may also be your own employee and pay Class 1 National Insurance through your PAYE payroll.

Do sole traders pay National Insurance?

Self-employed people who are sole traders pay National Insurance based on how much profit they make from their business. National Insurance, unlike income tax, is only payable by people who are aged 16 years or over, and are below the state pension retirement age.

How many years NI do I need for a full pension?

You need 30 years of National Insurance Contributions or credits to be eligible for the full basic State Pension. This means you were either: working and paying National Insurance. getting National Insurance Credits, for example for unemployment, sickness or as a parent or carer.

How much does it cost to buy missing NI years?

The standard cost of buying 'Class 3' National Insurance contributions is £15.85 for a week of missing contributions in the 2022-23 tax year. It would cost you £824.20 for an entire year. However, if you are looking to fill gaps that occurred in the past two tax years, you would pay the rate from those years.

What if I have gaps in my National Insurance?

You can have gaps in your National Insurance record and receive the full new State Pension. You can get a State Pension statement which will tell you how much State Pension you may get. You can also apply for a National Insurance statement from HM Revenue and Customs (HMRC) to check if your record has gaps.

How long does it take for voluntary NI contributions to show?

Unfortunately, this was incorrect your payment will not show in 10 working days, generally speaking we would normally advise it can take at least 6 weeks for this to show on your record.

Self-employed National Insurance rates

You usually pay 2 types of National Insurance if you’re self-employed: Class 2 if your profits are £6,725 or more a year Class 4 if your profits ar...

How much you pay

Class Rate for tax year 2022 to 2023 Class 2 £3.15 a week Class 4 10.25% on profits between £9,881 and £50,2703.25% on profits over £50,270 You can...

How to pay

Most people pay Class 2 and Class 4 National Insurance through Self Assessment. You must tell HM Revenue and Customs (HMRC) when you become self-em...

How do you pay National Insurance when self-employed?

Paying National Insurance when self-employed is done through a Self-Assessment tax return. You can do so online or you can download, fill in and post form SA100 to HMRC.

How much are Class 2 National Insurance contributions?

For the 2021 to 2022 tax year, the Class 2 National Insurance rate is £3.05 a week, and as indicated above, this applies if you make £6,515 or more in profits a year. It’s important to always check this rate from the website because it can change annually.

Why is it important to pay national insurance contributions?

Paying National Insurance Contributions when you’re self-employed is an important part of remaining compliant with HMRC. If you fail to get it right you’ll be penalised financially, and gain a poor reputation that can create difficulties in the future.

How often is class 4 insurance paid?

Class 4 National Insurance is generally paid to HMRC every six months – by 31st July and 31st January – using their ‘payment on account’ system. This involves an estimate of your future profits based on those of the previous tax year.

Why does HMRC charge on account?

The reason why HMRC charges payments on account is to prevent self-employed individuals paying tax too far in arrears. The system does introduce some cash flow issues for new businesses, however, due to the first tax bill often being higher than anticipated – 50% on average.

What are the two types of NI contributions?

Two types of National Insurance Contribution apply when you’re self-employed - Class 2 and Class 4. Class 3 NI contributions can also be made voluntarily if you have gaps in your National Insurance record that you need to fill in order to boost your entitlement to the state pension and other benefits.

Can you not pay national insurance if you are self employed?

Failing to pay National Insurance contributions when you’re self-employed can result in heavy penalties, so it pays to be organised and understand the system. If you require professional help in this respect, we can refer you to a number of fully qualified and trustworthy accountants in your area.

Can you make a class 2 payment?

You can still make voluntary Class 2 National Insurance payments – for example to make sure you get the full State Pension or to cover gaps in your National Insurance record.

Do self employed people pay NI?

Most self-employed people pay NI as part of their Self Assessment tax bill.

What Happens If I Don’t Pay Any National Insurance as a Self-Employed Person?

As HMRC calculates your National Insurance contributions, the only way to avoid paying them is to avoid paying your tax bill. But this is against the law and there are severe penalties for anyone who purposefully avoids tax. So in short, if you’re self-employed it’s hard to avoid making National Insurance payments!

How Do I Pay National Insurance as a Freelancer?

HMRC will calculate the National Insurance you owe when you submit your self-assessment tax return. So there’s no need to worry about choosing Class 2 or Class 4, and no need to worry about working out how much you owe. HMRC will do it all for you.

What is Class 2 National Insurance?

You pay Class 2 National Insurance if you make between £6,515 and £9,568 in the space of a year. You’ll pay a flat rate of £3.05 a week. We have a full guide to Class 2 National Insurance.

What are the requirements for self assessment?

You do not pay through Self Assessment if you’re any of the following: 1 an examiner, moderator, invigilator or person who set exam questions 2 running a businesses involving land or property 3 a minister of religion who does not receive a salary or stipend 4 living abroad and paying voluntary Class 2 contributions 5 a person who makes investments - but not as a business and without getting a fee or commission 6 a non-UK resident who’s self-employed in the UK 7 working abroad

When will HMRC send payment request?

HM Revenue and Customs ( HMRC) will send you a payment request by the end of October - call the newly self-employed helpline if you do not get one.

Can you pay class 2 National Insurance by cheque?

Most people pay the contributions as part of their Self Assessment tax bill. You cannot currently pay by cheque through the post because of coronavirus (COVID-19).

Who has to pay National Insurance contributions?

Given that you will be required to pay National Insurance contributions (NICs) on your earnings from the age of 16 until you retire, most people will be very familiar with the concept and how their NI contributions are deducted from their pay slip each month.

How to pay

For employees of companies using the PAYE method, all your income tax and NICs are calculated according to your tax code and deducted automatically from your salary before it is paid to you. For self-employed people, the picture is a little more complex.

What if I miss a year of contributions?

Whether you work for an employer using PAYE or you’re self-employed, there may be periods in your working life when you are not earning and therefore not paying NICs. This can lead to gaps in your contributions record. These gaps can affect:

Planned changes to National Insurance

As with many aspects of the UK’s taxation system, National Insurance is a constantly evolving set of calculations meaning that, year to year, the amount you will be required to contribute can change.


Use form CA5601 to arrange to pay self-employed National Insurance contributions by Direct Debit.

If you live outside the UK

If you live abroad and pay self-employed voluntary National Insurance, fill in the form at the end of leaflet N138.

Why are you not considered an employer?

You’re not considered an employer only because you hire independent contractors to do some work.

Is Marketplace Savings based on last year's income?

Marketplace savings are based on your estimated net income for the year you’re getting coverage, not last year’s income. When you’re self-employed, it can be hard to estimate your income for the coming months or year. Learn how to estimate your income if you’re self-employed.

Can I use the marketplace for self employed?

You can enroll through the Marketplace if you’re a freelancer, consultant, independent contractor, or other self-employed worker who doesn’t have any employees . If your business has even one employee (other than yourself, a spouse, family member, or owner), you may be able to use the SHOP Marketplace for small businesses to offer coverage to yourself and your employees. See " How do I know if I’m self-employed or a small employer? " to learn more.

Do you have to file a joint tax return for Marketplace?

In most cases, a married couple has to file a joint federal tax return to be eligible for premium tax credits and other savings on Marketplace plans. Learn about the limited exceptions to the joint-filing rule.

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