Class 4 National Insurance for Self-Employed Workers in the UK

Class 4 National Insurance is the main tax charge on self-employed profits in the UK. Since Class 2 was effectively abolished from April 2024, most sole traders interact with Class 4 alone. It works differently from the employee NI deducted through PAYE: there are no weekly contributions, no employer top-up, and the bill is calculated as a percentage of annual profit rather than a per-paycheque deduction.

This guide explains Class 4 NI rates and thresholds for 2025/26, how the calculation works in practice, and how it fits alongside income tax on your self assessment return. Use our self-employed tax calculator to see your combined income tax and Class 4 NI bill for the year.

Class 4 NI rates for 2025/26

For the 2025/26 tax year, Class 4 NI is charged at 6% on profits between £12,570 and £50,270 (the Lower Profits Limit and Upper Profits Limit), and at 2% on profits above £50,270. No Class 4 NI is due on profits below £12,570. These thresholds align with the personal allowance and the basic rate income tax upper limit, which keeps the system consistent even though the charges are calculated separately.

Worked examples at different profit levels

A sole trader with £25,000 profit pays Class 4 on £12,430 (profit minus the £12,570 threshold). At 6%, that is £745.80. Add income tax of 20% on the same £12,430, which is £2,486, and the combined bill is £3,231.80 before any other income or reliefs.

At £45,000 profit, Class 4 is 6% of £32,430, which equals £1,945.80. Income tax is 20% of £32,430, which is £6,486. Combined: £8,431.80. At £70,000 profit, Class 4 is 6% on £37,700 (£2,261.80) plus 2% on £19,730 (£394.60), totalling £2,656.40. Income tax adds approximately £15,432 at basic and higher rates. The total tax and NI bill at £70,000 profit approaches £18,088.

Run your own figures through our self-employed tax calculator rather than relying on rounded examples. Your actual bill depends on other income, pension contributions, and any marriage allowance or gift aid adjustments.

What happened to Class 2 NI

Class 2 NI was a flat-rate weekly contribution of £3.45 per week (for 2024/25) paid by self-employed people with profits above the Small Profits Threshold. From April 2024, Class 2 was abolished as a mandatory charge. Self-employed workers no longer pay it automatically, which saves roughly £179 per year.

However, Class 2 can still be paid voluntarily at £3.45 per week if your profits are below £6,845 (the Small Profits Threshold for 2025/26). Voluntary payments protect your entitlement to the State Pension and certain contributory benefits. If your profits are consistently above £12,570, your Class 4 contributions alone are sufficient to maintain your NI record for State Pension purposes.

How Class 4 compares to employee NI

Employees pay Class 1 NI at 8% on earnings between £12,570 and £50,270, and 2% above that (rates for 2025/26). The employee rates look similar to Class 4, but employees also benefit from an employer NI contribution of 13.8% on earnings above £9,100 per year. That employer contribution funds the same benefits system but does not come out of the employee's pay.

Self-employed workers pay Class 4 only, with no employer equivalent. This is one reason why limited company directors often take a small salary (up to the NI threshold) plus dividends: it can reduce the total NI paid compared to sole trader profits taxed as Class 4. The trade-off is additional compliance costs for running a company. Our sole trader vs limited company guide explores when that switch makes sense.

Class 4 vs Class 1 at £40,000 earnings/profit

• Employee Class 1 NI: 8% of £27,430 = £2,194.40 (employer pays additional 13.8%)
• Sole trader Class 4 NI: 6% of £27,430 = £1,645.80
• Sole trader pays less NI but has no employer contributions to pensions or benefits
• Both pay the same income tax at 20% on earnings above the personal allowance

When and how Class 4 is paid

Class 4 NI is not paid monthly or weekly. It is calculated on your self assessment return and paid in a lump sum (or through payments on account) by 31 January following the tax year. For 2025/26 profits, the payment deadline is 31 January 2027. If your tax bill exceeds £1,000, HMRC will also require payments on account of 50% each on 31 January and 31 July during the year.

Payments on account include both income tax and Class 4 NI. They are based on the previous year's bill, so your first year of self-employment often has no payments on account (just the single January payment). From year two onwards, you pay half in January and half in July, then a balancing payment or refund the following January. Full details are in our self assessment deadlines guide.

Reducing your Class 4 bill legitimately

Class 4 is calculated on profit, not turnover. Every legitimate business expense you claim reduces your profit and therefore your Class 4 liability. Pension contributions made through your self assessment also reduce taxable income (though the mechanism differs for personal pensions). Using the £1,000 trading allowance (if your gross income is under £1,000) eliminates both income tax and Class 4 on that income entirely.

Mileage claims at 45p per mile for the first 10,000 business miles (25p thereafter), home office deductions using simplified expenses, and capital allowances on equipment all reduce the profit figure Class 4 is charged on. Keep meticulous records and consider an accountant if your affairs involve multiple income streams, VAT registration, or significant equipment purchases.

Class 4 NI is a non-negotiable part of self-employment, but it is predictable once you understand the thresholds. Forecast your bill early using our self-employed tax calculator, set aside 25% to 30% of profit for the combined tax and NI bill, and file on time to avoid penalties and interest.

Class 4 and your State Pension record

Class 4 contributions count towards your National Insurance record for State Pension purposes, provided your profits exceed the Small Profits Threshold of £6,845 for 2025/26. Below that level, no Class 4 is due and no NI credits are earned automatically. You can pay voluntary Class 2 at £3.45 per week to fill gaps in your record. You need 35 qualifying years of NI contributions for the full new State Pension of £221.20 per week (2025/26 rate).

Check your State Pension forecast at gov.uk/check-state-pension. If you have gaps from low-profit years early in your self-employment career, voluntary Class 2 payments are usually worthwhile. Each additional qualifying year adds roughly £6.32 per week to your State Pension for life, which is over £300 per year. The cost of one year of voluntary Class 2 is £179.40, so the return is strong if you live a normal retirement lifespan. Even one or two gap years can cost you thousands in lost pension income over a 20-year retirement.

Class 4 for partners in a business

In a general partnership, each partner pays Class 4 on their share of the partnership profits, not on the total partnership profit. If a partnership earns £120,000 and you own a 50% share, your Class 4 is calculated on £60,000. The same thresholds and rates apply as for sole traders. Limited liability partnerships (LLPs) follow the same rules for individual members who are treated as self-employed for tax purposes.

Partnership profits are allocated according to the partnership agreement, which may not reflect each partner's actual work contribution. HMRC looks at the commercial basis of profit-sharing arrangements and can challenge allocations that appear designed to reduce one partner's Class 4 liability. Document your profit-sharing rationale clearly, particularly if partners have significantly different roles, capital contributions, or working hours. A well-drafted partnership agreement protects all parties if HMRC raises questions.

Planning Class 4 across the tax year

Unlike PAYE where NI is deducted monthly, Class 4 is a single annual charge. This creates a cash flow challenge for self-employed workers who spend their revenue throughout the year without setting money aside. A practical approach is to transfer 25% of every client payment into a dedicated tax savings account. When January arrives, the bill is already funded and you avoid the scramble that catches out so many first-year sole traders.

If your profits vary significantly year to year, payments on account can overestimate or underestimate your actual Class 4 liability. A bumper year followed by a quiet year means your payments on account are based on the high year, creating a cash flow pinch in July and January. Apply to reduce payments on account if you know profits have dropped, or save the surplus from good years to cover the advance payments in leaner ones. Full details on the payment schedule are in our self assessment deadlines guide. Treat Class 4 as a fixed cost of doing business and budget for it from your very first invoice, not just when the January bill lands.