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NATIONAL INSURANCE - SUMMARY

Whether you are employed of self employed you will at some stage have to deal with national Insurance. National Insurance rules and regulations can appear quite complex. You can talk to HM Revenue and Customs to get help to understand what you should pay and whether you should consider making further voluntary contributions.

Most self-employed people pay two classes of National Insurance contributions:

  • Class 2, paid at a weekly flat rate and
  • Class 4, paid on profits and gains at or above a set level.

This applies to all people who are:

  • normally self-employed and
  • aged 16 or over and

under state retirement age (60 for a woman, 65 for a man).

Class 2 contributions
These are weekly flat rate payments, currently £2.05 a week, which count towards Incapacity Benefit, state retirement pension and Bereavement Benefit.

Class 4 contributions
If your profits are over a certain amount, you may have to pay Class 4 contributions as well as Class 2. You will normally be asked to calculate your Class 4 contributions when you fill in your tax return. Class 4 contributions help fund the benefits paid to all self-employed people.

Exempt and special groups
Some people are exempt from Class 2 contributions. These include

  • anyone with a Small Earnings Exception certificate
  • married women or widows with reduced liability

What happens if I don’t pay National Insurance contributions?
You could lose out on your future entitlement to benefits or a state retirement pension if you fail to keep your contributions up to date. By law, you must pay your contributions and the debt could be enforced through the courts if you fail to pay what’s due.

For further information contact:

www.hmrc.gov.uk and follow the links.

Illness
If you are ill for a whole week, you do not have to pay National Insurance contributions for that week.

Paying your National Insurance contributions
You must pay your Class 2 (flat rate) National Insurance contributions from the outset. Most people find it convenient to pay them by monthly Direct Debit. If you prefer, you can ask to be sent a quarterly bill once every 13 weeks.

You pay your Class 4 (profit-related) National Insurance contributions with your tax after the end of the tax year. For more information about Class 4 National Insurance contributions see National Insurance-Detail (link)

Putting off payment
If you are both employed and self-employed and expect to pay, or have paid, more than a certain amount of National Insurance contributions for any tax year, you may be able to get a refund or put off payment.

Employee’s National Insurance contributions
If you employ someone, you will be responsible for taking tax and Class 1 National Insurance contributions from their pay and paying it to the Inland Revenue. You will also be responsible for payment of Class 1 employer’s National Insurance contributions. For further information contact www.inlandrevenue.gov.uk

If you would like to download this document please click on one of the links below:

National Insurance - summary (Word Document 108Kb)
National Insurance - summary (PDF Document Kb)


You will almost certainly have to pay National Insurance.

The type and amount of contributions that you are required to make will depend on your employment.

You can get information on National Insurance from the Inland Revenue