Class 2 and Class 4 National Insurance for the Self-Employed

National Insurance is the part of the self-employed tax bill people understand least. Here's how Class 2 and Class 4 work — and what recently changed.

Two classes, one Self Assessment

As a self-employed person you can pay two kinds of NIC, both collected through Self Assessment (and, in future, finalised through your MTD final declaration):

• Class 2 — historically a flat weekly charge that builds your entitlement to the State Pension and certain benefits.
• Class 4 — a percentage of your profits above a threshold. This one is purely a tax; it doesn't add benefit entitlement.

What changed with Class 2 (2024/25)

From 2024/25 the treatment of Class 2 changed significantly:

• If your profits are above the small profits threshold, you're treated as having paid Class 2 — you keep the benefit entitlement without paying the weekly charge.
• If your profits are below that threshold, Class 2 is no longer compulsory, but you can pay it voluntarily to keep your State Pension record complete — often excellent value.

How Class 4 works

Class 4 is a percentage of profits between the lower and upper profits limits, with a lower percentage on profits above the upper limit:

Profits	Class 4
Below the lower profits limit	No Class 4
Between lower and upper limits	Main percentage rate
Above the upper limit	Reduced percentage rate

The exact rates and thresholds change each year, so always check the current figures — recent years have seen the main rate reduced.

Voluntary contributions: don't overlook them

If your profits are low, check your National Insurance record. A missing year can reduce your State Pension, and paying voluntary Class 2 is usually far cheaper than voluntary Class 3 to fill the same gap.

NIC under MTD

Your quarterly updates report income and expenses only. National Insurance is calculated at the final declaration, alongside income tax, from your final profits — so you'll see the NIC figure when you finalise the year, not each quarter.

Key takeaways

• Class 4 = a percentage of profits; Class 2 = flat weekly, building benefit entitlement.
• Since 2024/25, above the small profits threshold you get Class 2 entitlement without paying; below it, pay voluntarily to protect your pension.
• Rates/thresholds change yearly — check current figures.
• NIC is calculated at your final declaration, not each quarter.

This article is general information, not tax advice. Check current rates at gov.uk or speak to your accountant.