Sole traders must register to pay self-employed National Insurance contributions with HM Revenue and Customs (HMRC). Sole traders pay Class 2 and Class 4 National Insurance contributions (NICs). This article gives you an overview of National Insurance for the self-employed and demonstrates how much National Insurance will be due by a sole trader for 2018/19.

What is National Insurance?

National Insurance is a system of contributions paid to qualify for certain benefits including the State Pension.

As a sole trader you will pay National Insurance if you’re:

  • 16 or over
  • self-employed and making a profit of £6,205 or more a year (for 2018/19).

You need a National Insurance number before you can start paying National Insurance contributions. Self-employed individuals are liable to class 2 and class 4 National Insurance.


Download: National Insurance calculator

Download the attachment below to calculate how much National Insurance will you'll pay for 2018/19 and 2017/18. 

Click on the button below to download a copy. 

Self employed tax and National Insurance calculator.xlsx

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How and when will I pay National Insurance?

Both Class 2 and Class 4 National Insurance Contributions are calculated as part of the self-assessment process so will need to be paid by 31 January 2018 for 2016/17. Many self-employed individuals are under what is known as the payments on account regime.

This means they make two payments (estimates using last year’s tax bill) towards this year’s tax liability.

These payments on account will include Class 4 National Insurance but will not include Class 2. Class 2 will be paid all in one go when they pay their tax unless an individual agrees a voluntary spreading payment plan with HMRC directly. 


Should I consider paying voluntary contributions?

You may choose to make voluntary Class 3 National Insurance contributions if, for example, you have gaps in your National Insurance record. Voluntary contributions will give you credit for that payment period towards certain state entitlements such as a credit towards the new flat rate state pension.

The Class 3 contribution rates are a lot higher than Class 2 at £14.25 per week. 

If you want to review your national insurance credits to date, you can contact HM Revenue and Customs (HMRC). Note that from April 2016 the new flat rate pension applies.

It is important to be aware of the number of ‘credit years’ to be eligible for the full amount of state pension:

  • 30 years if you reach State Pension age on or after 6 April 2010 but before 6 April 2016, or
  • 35 years if you reach State Pension age on or after 6 April 2016.

Before making a decision on paying voluntary contributions we recommend you speak to an experienced professional for more advice.

You can check the details of your National Insurance record here


Next Steps

National Insurance - deadlines and penalties for employers

If you employ staff you are responsible for deducting the correct amount of national insurance from the payments made to your employees. In addition employer’s national insurance contributions must also be made.

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Self Assessment tax returns for sole traders

If you are self-employed you will pay your tax using a self-assessment tax return. This article will give you an overview of the self-assessment process and your legal obligations as a self-employed individual.

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