How to Pay National Insurance When Self-Employed

by Peter Lancett ; Updated July 27, 2017

National insurance is a tax paid in the United Kingdom. Although national insurance contributions are collected by Her Majesty's Revenue and Customs (HMRC) service and are added to the pool of general taxation funds, up-to-date contributions allow people to claim certain state benefits, such as maternity leave payments, that they would not be able to claim otherwise. Self-employed people pay flat-rate national insurance contributions, plus contributions based on the level of profit they make each year. If you are self-employed, you can pay your national insurance contributions in a number of ways.

Class 2 Contributions

National insurance contributions are divided into four classes. Class 2 and Class 4 contributions apply to self-employed persons. You pay Class 2 contributions at a fixed rate that does not depend upon your level of earnings, although you may not have to pay them at all if your earnings are less than 5,075 pounds per year. If your earnings are lower than this, you may apply for a Certificate of Exemption stating that you do not have to pay the contributions. If you do have to pay Class 2 contributions, they are set at a rate of 2.40 pounds per week.

How to Pay Class 2 Contributions

If you are self-employed and you earn more than the Class 2 contributions threshold, there are a number of ways to pay these contributions. You can pay monthly by direct debit, which allows HMRC to take the payments from your bank account each month. You can also pay by telephone or Internet banking, but you must make sure that you enter the HMRC bank details correctly and you must supply your own national insurance number as a reference so that HMRC can apply the payment to your account.

If your contribution payments are in arrears, you can make a CHAPS payment to clear the arrears by instructing your bank to make the payment. Most banks will charge you for making a CHAPS payment. Again, when making a CHAPS payment, you must supply your national insurance number, and use the correct HMRC bank account number. Post offices in the U.K. act as agents for HMRC Class 2 national insurance contributions, and you can pay your contributions over the counter at a post office.

Class 4 Contributions

When your self-employed earnings exceed 5,175 pounds in any tax year, you will have to pay Class 4 national insurance contributions. For all earnings above this amount, up to 43,875 pounds, you must pay 8 percent of your earnings as Class 4 national insurance contributions. You must 9 percent on earnings above that upper limit. If you have to pay Class 4 contributions, you calculate the amount you must pay on your general income tax self-assessment return form, and you must include the amount of these contributions when you pay your income tax, either by check, Internet banking or CHAPS payment.

Class 3 Contributions

Class 3 contributions are used to make top-up payments to ensure that your national insurance contributions are up to date. If you are self-employed, or you have been working overseas and not paying tax in the U.K., there may be a gap in your contribution record. You can make a one-off Class 3 payment to bring your contributions up-to-date. As with Class 2 contributions, you can make Class 3 contribution payments by direct debit, Internet or telephone banking or at a post office. HMRC recommends that you use electronic payment to avoid the postal delays and cost that may occur if you pay by check.

About the Author

Peter Lancett has been writing professionally for over 10 years. He has five novels and a series of award-winning illustrated books currently distributed internationally. Lancett writes for film and television alongside his work writing instructional articles online. He has traveled extensively and has lived in England and New Zealand.