Self Employed National Insurance Contributions - What Do You Pay?

National Insurance is one of the many areas of tax that often confuses people, and it's no wonder! With so many different rates for businesses, employers and employees, you could be forgiven for getting a little lost.
But you can't be forgiven for not knowing your Self Employed NI Contributions after reading this article!
So let's get started. As a self employed person, you normally have to pay Class 2 NI Contributions. Also, if your profits are over a certain amount, you may also pay Class 4 NI Contributions.

As with many taxes, you may be exempt from paying NI if you meet certain criteria.

Class 2 Self Employed National Insurance Contributions

You will pay Class 2 NI contributions at a flat rate of £2.65 per week. However, if your earnings are below £5,595 per year (2012/13), then you may not need to pay.

Exceptions to paying Class 2 NI Contributions

You do not have to pay Class 2 NI Contributions if any of the following apply:

• You are under 16
• You have reached State Pension age
• You're a married woman or widow who is entitled to pay reduced contributions
• Your earnings are below a certain level (£5,595 for 2012/13)

Since April 2011, your Class 2 NI Contributions payments will become due on the 31 January and 31 July, the same dates as your Self Assessment tax bill.

Class 4 Self Employed NI Contributions

If you are self employed, and your profits are over a certain amount, you will normally have to pay Class 4 NI as well as Class 2 Contributions.

You will pay 9% on your annual profits between £7,605 and £42,475 (2013/13) and 2% on any profit over that threshold.

Your Class 4 NI is worked out on your Self Assessment tax return, and paid alongside your Income Tax.

If you have more than one business, special rules apply for calculating adjustments to profits on which you pay Class 4 National Insurance Contributions.

Exceptions to Class 4 National Insurance Contributions

You do not have to pay Class 4 National Insurance Contributions if any of the following apply:

• You are under 16

• You are still working in the tax year after you reached State Pension age

• You are not resident in the UK for tax purposes

If you are under 16 you'll have to apply for an exemption by filling in form CA2835U. You can get the form by writing to:
HM Revenue & Customs
Deferment Services
National Insurance Contributions Office
Benton Park View
Newcastle upon Tyne
NE98 1ZZ
And there you have it; your guide to Self Employed National Insurance Contributions.
Ben works for Keepers Accountancy, who are a proactive firm of accountants specialising in Personal Allowance 2012 and Employer's National Insurance Contributions. To find out more, visit our website!
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