National Insurance Contributions (NICs) are a crucial consideration for self-employed workers in the UK. These payments not only contribute to vital state services but also determine your eligibility for benefits like the State Pension and Maternity Allowance. This guide dives into everything self-employed individuals need to know about NICs in 2025, including rates, thresholds, and how to stay compliant.
If you are unsure where to start with national insurance and have questions, get in touch with Clayton Stirling today.
What Are National Insurance Contributions?
National Insurance Contributions are payments made by workers and employers to fund essential state benefits. For self-employed individuals, NICs are paid based on your annual profits and come in two classes:
- Class 2 NICs: A flat rate paid if your profits are above the Small Profits Threshold.
- Class 4 NICs: A percentage of your annual profits above a certain threshold.
These contributions ensure that you qualify for key benefits such as the State Pension, Maternity Allowance, and Employment and Support Allowance (ESA).
National Insurance (NI) in the UK is a tax that funds various state benefits and public services. The money collected through NI contributions is primarily used to pay for:
- State Pension – Provides financial support for individuals once they reach the state pension age.
- NHS (National Health Service) – Helps fund healthcare services, including hospitals, GP services, and treatments.
- Unemployment Benefits – Supports individuals who are out of work and eligible for benefits like Jobseeker’s Allowance (JSA).
- Maternity and Paternity Benefits – Funds statutory maternity pay, paternity pay, and shared parental leave.
- Sick Pay – Supports employees who qualify for Statutory Sick Pay (SSP).
- Disability Benefits – Contributes to benefits such as Employment and Support Allowance (ESA) and Personal Independence Payment (PIP).
- Bereavement Benefits – Helps support widows, widowers, and civil partners after the death of a spouse or partner.
National Insurance contributions (NICs) are paid by employees, employers, and self-employed individuals, with different classes of NI depending on income and employment status. Let me know if you need more details or a specific focus for your blog post! The BBC have a great post on NI and income tax, read here.
Can I check how much National Insurance I have paid?
The governemtn website makes it easy for you to find out how much you have contributed to national insurance as well as check when you are eligable for state pention. You can access it via this link, Check your National Insurance record here. This link allows you to login via your Self Employed login, it then lets you see when you can get your state pension, as well as how much national insturance you have paid.
NICs Rates and Thresholds for Self-Employed Workers in 2025
As a self-employed individual, your NICs obligations depend on your profits. Here are the rates and thresholds for the 2025/26 tax year:
Class 2 Contributions
- Weekly Rate: £3.45
- Small Profits Threshold: £12,570 per year
If your annual profits exceed £12,570, you must pay Class 2 NICs. If your profits are below this threshold, you can opt to make voluntary contributions to maintain your National Insurance record.
Class 4 Contributions
- 9% on profits between £12,570 and £50,270
- 2% on profits above £50,270
These contributions are calculated as part of your Self Assessment tax return.
Why National Insurance Matters for the Self-Employed
For self-employed individuals in the UK, National Insurance (NI) is essential as it determines access to certain state benefits and contributes to financial security in later life. Here’s why NI matters for the self-employed:
1. Qualifies You for the State Pension
Self-employed individuals pay Class 2 and Class 4 National Insurance contributions (NICs). Paying these ensures eligibility for the State Pension, which requires at least 10 qualifying years of NI payments, with 35 years needed for the full amount.
2. Provides Access to Benefits
Although self-employed people don’t qualify for all the benefits that employees receive, paying NI still grants access to:
- Maternity Allowance – Financial support for new mothers who don’t qualify for Statutory Maternity Pay.
- Employment and Support Allowance (ESA) – Support for those unable to work due to illness or disability.
- Bereavement Support Payment – Financial help for widows, widowers, or surviving civil partners.
3. Helps Avoid Large Future Bills
If you don’t pay enough NI during your working life, you may need to make voluntary contributions later to qualify for the State Pension or other benefits. Keeping up with contributions avoids costly catch-ups in the future.
4. Class 2 vs Class 4 National Insurance Contributions
- Class 2 NICs – Paid by self-employed individuals earning over £12,570 per year.
- Class 4 NICs – Paid on profits over £12,570, with an additional percentage charged on higher earnings.
5. Potential Future Changes
The government periodically reviews National Insurance rules, so staying informed is crucial. Changes could impact thresholds, contribution rates, or benefit entitlements for the self-employed.
National Insurance is more than just another tax—it’s an investment in your future financial security. Understanding how it works ensures that self-employed individuals can maximise their benefits and avoid gaps in their contributions.
How Other Countries Compare in Terms of Tax and National Insurance for the Self-Employed
The way self-employed individuals are taxed and contribute to social security varies significantly across different countries. While the UK has a system based on Class 2 and Class 4 National Insurance Contributions (NICs), other nations approach self-employment taxes in different ways, often combining income tax with mandatory social security payments.
United States
In the U.S., self-employed individuals pay Self-Employment Tax, which covers Social Security and Medicare. This tax is set at 15.3% on net earnings, with 12.4% going toward Social Security and 2.9% toward Medicare. Unlike the UK, there are no separate national insurance-style contributions, but self-employed workers must pay their share of both employer and employee taxes. However, they can deduct 50% of this tax as a business expense, slightly reducing the burden. You can read more about this here.
Germany
Germany has a compulsory health insurance system, and self-employed individuals must contribute to either the public scheme or a private insurer. Contributions are based on income, with the minimum monthly health insurance payment often exceeding €200. Additionally, if self-employed workers opt into the state pension system, they must pay around 18.6% of their income. However, unlike the UK, pension contributions are not mandatory for all freelancers—only for certain professions, such as teachers and artists.
France
France has a relatively high social security burden for the self-employed. Contributions go toward healthcare, pensions, family benefits, and training. Depending on the business structure, self-employed workers can pay around 22%–45%of their income in social security contributions. However, France also provides strong state support, including generous healthcare benefits and pension provisions, making it a high-tax but high-benefit system.
Australia
Australia does not have a national insurance system like the UK but instead relies on income tax and the Superannuation system. Self-employed individuals are responsible for contributing to their own Superannuation (retirement fund), though it is not compulsory. The Medicare Levy, usually 2% of taxable income, helps fund the public healthcare system, but private health insurance is also encouraged.
How the UK Compares
The UK’s National Insurance system for the self-employed is relatively low compared to some European countries, where contributions can be much higher. However, the trade-off is that the UK offers fewer benefits, such as limited sick pay and no automatic pension enrolment for the self-employed. In contrast, countries like France and Germany provide more generous social benefits but require higher contributions. The U.S. system places a heavier tax burden on self-employed workers but offers more flexibility in pension planning.
Ultimately, each system has its pros and cons, and self-employed workers must navigate different levels of taxation and benefits depending on where they operate.
How to Pay National Insurance as a Self-Employed Worker
Self-employed individuals pay NICs through their Self Assessment tax return. Here’s how the process works:
- Register for Self Assessment: If you’re newly self-employed, register with HMRC to get started.
- Track Your Profits: Keep accurate records of your income and expenses to calculate your annual profits.
- Complete Your Tax Return: Submit your Self Assessment tax return online by 31st January each year, ensuring you include Class 2 and Class 4 NICs.
- Pay Your NICs: HMRC will calculate your NICs based on your reported profits and include them in your final tax bill.
To ensure you’re on track for state benefits, regularly review your National Insurance record. Here’s how:
- Online: Log into your personal tax account on the UK government’s website to view your contributions.
- Request a Statement: If you’re unsure about your record, request a detailed statement from HMRC.
- Fill Gaps: Consider making voluntary Class 2 or Class 3 contributions if there are gaps in your record.
Common Questions About NICs for the Self-Employed
1. What happens if I don’t pay NICs?
Failing to pay NICs can lead to:
- Loss of eligibility for the full State Pension and other benefits.
- Penalties or fines from HMRC.
- Difficulty accessing Maternity Allowance or ESA.
2. Can I get a refund on overpaid NICs?
If you believe you’ve overpaid NICs, contact HMRC to request a review and potential refund.
3. Should I make voluntary contributions?
If your profits are below the Small Profits Threshold, consider making voluntary Class 2 contributions to maintain your eligibility for key benefits.
Tips for Managing NICs as a Self-Employed Individual
- Set Money Aside: Regularly set aside funds for your NICs and tax bill to avoid last-minute stress.
- Keep Accurate Records: Track your income and expenses diligently to ensure accurate calculations.
- Stay Informed: Keep up with changes to NICs rates and thresholds announced in the annual Budget.
- Consult a Professional: If you’re unsure about your obligations, seek advice from an accountant or tax specialist.
Conclusion – National Insurance for Self Employed
National Insurance Contributions are a critical aspect of financial planning for self-employed workers. By understanding your obligations, staying compliant, and planning ahead, you can protect your entitlement to state benefits while avoiding penalties. If you have questions about your NICs or need support with your Self Assessment, consult a tax professional to ensure you’re on the right track.
