Class 4 National Insurance for Self-Employed

Introduction

Class 4 National Insurance is a percentage-based contribution paid by self-employed individuals on their profits. Unlike Class 2 (flat rate), Class 4 scales with your earnings and forms the bulk of NI for higher earners.

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2025/26 Rates and Thresholds

Band	Profits	Rate
Below threshold	£0 - £12,570	0%
Main rate	£12,571 - £50,270	6%
Upper rate	Over £50,270	2%

Lower Profits Limit (LPL)

£12,570 - No Class 4 NI on profits below this amount

Upper Profits Limit (UPL)

£50,270 - Rate drops from 6% to 2% above this

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How Class 4 Is Calculated

Class 4 NI is calculated on your taxable profits from self-employment.

Example 1: £40,000 Profit

• Profits below £12,570: £0 NI
• Profits £12,571 - £40,000: £27,430 × 6% = £1,645.80
• Total Class 4: £1,645.80

Example 2: £70,000 Profit

• Profits below £12,570: £0 NI
• Profits £12,571 - £50,270: £37,700 × 6% = £2,262
• Profits £50,271 - £70,000: £19,730 × 2% = £394.60
• Total Class 4: £2,656.60

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Who Pays Class 4 NI?

You pay Class 4 if:

• You're self-employed (sole trader or partner)
• Your profits exceed £12,570
• You're 16 or over and below State Pension age

Multiple Self-Employments

If you have multiple self-employments, profits are combined for Class 4 calculation.

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Payment Through Self Assessment

When It's Calculated

HMRC calculates your Class 4 liability when you submit your Self Assessment tax return.

Payment Timeline

For 2025/26:

• Tax year: 6 April 2025 - 5 April 2026
• Filing deadline: 31 January 2027
• Payment deadline: 31 January 2027

Class 4 is added to your overall tax bill along with Income Tax and Class 2 NI.

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Class 4 vs Class 2 NI

Feature	Class 4	Class 2
Type	Percentage of profits	Flat weekly rate
Rate	6%/2%	£3.45/week
Purpose	General taxation	State Pension & benefits
Main cost	Higher earners	Minimal (~£179/year)

Both are payable on self-employment profits above £12,570.

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Reducing Class 4 NI

Legitimate Strategies

1. Claim all allowable expenses - Lower profits = lower NI
2. Pension contributions - Personal contributions reduce profits
3. Use capital allowances - Equipment purchases reduce profits
4. Timing income/expenses - Spread profits across tax years if possible

Note on Tax Planning

Class 4 NI is harder to reduce than Income Tax as fewer reliefs apply directly. Focus on reducing taxable profits through legitimate business expenses.

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If You're Also Employed

Maximum NI Contributions

If you pay Class 1 NI through employment AND Class 4 through self-employment, there's a maximum annual contribution.

How It Works

• Primary threshold for Class 1: £12,570
• Combined with Class 4, HMRC ensures you don't overpay
• Excess may be refunded or offset

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Over State Pension Age

If you reach State Pension age during the tax year:

• No Class 4 NI on profits after that date
• Profits are apportioned across the year
• Calculation is automatic through Self Assessment

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FAQs

Does Class 4 count toward State Pension?

No. Only Class 2 NI builds State Pension entitlement. Class 4 is purely a tax.

Can I claim Class 4 as a business expense?

No. National Insurance is not an allowable business expense.

What if my profits vary year to year?

Class 4 is calculated annually. High profits one year don't affect the next year's calculation.

Is Class 4 changing soon?

The main rate was reduced from 9% to 6% in recent years. Future changes depend on government policy.

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Conclusion

Class 4 NI is a significant cost for profitable self-employed individuals. At 6% on profits between £12,570 and £50,270 (2% above), it adds up quickly. Focus on claiming all legitimate expenses to reduce your taxable profits and thereby your Class 4 liability.