Definition
Class 4 National Insurance is paid by self-employed people on their taxable profits and collected by HMRC through Self Assessment, alongside Income Tax. For 2026/27 the rate is 6% on profits between £12,570 and £50,270 and 2% on profits above £50,270. Nothing is due on profits of £12,570 or less, and the amount is worked out on the annual tax return.
Class 2 is now voluntary
Class 2 National Insurance is no longer compulsory. For 2026/27, if your profits are £7,105 or more, Class 2 contributions are treated as paid, which protects your National Insurance record at no cost. Below that, you can choose to pay voluntary Class 2 at £3.65 a week to keep building State Pension entitlement.
Worked example
A sole trader with profits of £30,000 in 2026/27 pays Class 4 of 6% on £17,430 (the profit above £12,570), which is £1,045.80. The amount is added to the Self Assessment bill and counts towards payments on account.
The guide to Class 2 and Class 4 National Insurance covers both classes, and SmartFiling’s Self Assessment tax return service includes the calculation on your return.
Related questions
- Do I need to file a Self Assessment tax return? Yes, if you were a sole trader earning more than £1,000 before expenses; Class 4 is calculated on that return.
- Should I be a sole trader or a limited company? Directors pay no Class 4 on company profits; National Insurance applies to their salary through PAYE instead. The sole trader vs limited company guide compares both.
Related terms
-
Self Assessment
Self Assessment is the system HM Revenue and Customs (HMRC) uses to collect Income Tax that is not taken automatically, for example through PAYE.
Read definition -
Trading allowance
The trading allowance is a £1,000 tax-free allowance each tax year for income from self-employment, casual work and side hustles…
Read definition -
Employer National Insurance
Employer National Insurance (secondary Class 1 National Insurance contributions) is the amount a company pays HMRC on top of the salaries it pays employees and directors.
Read definition
