Self-employed individuals are usually required to pay Class 4 National Insurance contributions (NICs) if their annual profits exceed £12,570. For the 2024-25 tax year, Class 4 NIC rates are set at 6% (down from 9% in 2023-24) on profits between £12,570 and £50,270, with an additional 2% charged on profits above £50,270.
Certain groups are exempt from paying Class 4 NICs, including:
- Individuals under 16 at the start of the tax year.
- Individuals over State Pension age at the start of the tax year. If someone reaches State Pension age during the tax year, they remain liable for Class 4 NICs for the entire tax year.
- Trustees and guardians of incapacitated individuals are exempt from paying Class 4 NICs on that income.
The Class 4 NIC rate is lower than the corresponding rate for employees, who pay 8% on the same income levels. Both employees and the self-employed contribute 2% on income above the higher rate threshold.
The majority of individuals pay Class 4 National Insurance via self-assessment.
Source:HM Revenue & Customs| 14-10-2024
