Contractor's Tools
IR35 News
Recruiter FAQs

Are you switching from Limited Company to Umbrella Employment? Click here to calculate your take home pay >>

We have created an information hub to support our Orange Genie Accountancy clients, our Umbrella Employees and agencies where the Covid-19 rules and legislation are explained for recruiters, contractors and the self-employed. Click here to find out more>>

National Insurance for Self-Employed Contractors

self-employed

As a self-employed contractor you will probably need to pay National Insurance (NI) as well as income tax on your profits. In this article we’ll explain what NI is, how it works for self-employed people and how to pay the right amount.

Everything you need to know about self-assessment: Download our FREE guide>>

What is National Insurance (NI)?

National Insurance is a tax on earnings and self-employed profits. Entitlement to state pension and certain other benefits depends on you building up National Insurance contributions throughout your working life. You pay mandatory National Insurance if you’re:

  • Over 16 and employed with earnings over the threshold.
  • Between 16 and state pension age and self-employed with profits over the threshold.

In some circumstances you may decide to pay voluntary NI contributions to cover any gaps in your contributions record.

How does National Insurance work if you’re self-employed?

For employees who are paid through a payroll system, NI contributions are taken automatically, but if you’re self-employed you’ll need to make payments through your self-assessment tax return.

There are three types of NI contributions you might pay as a self-employed contractor:

Class 2 – a lower rate on profits exceeding the lowest threshold

Class 3 – voluntary contributions to remove any gaps in your NI record

Class 4 – a higher rate on profits exceeding a higher threshold

Most self-employed contractors will pay class 2 and class 4 NI contributions.

Self-Employed National Insurance Rates (2021/22)

Class 2:

The threshold for class 2 NI contributions for tax year 2021/22 is £6,515. You’ll pay £3.05/week if your profits are over this amount.

Class 4:

You’ll pay 9% on profits above £9,568. The rate falls to 2% on profits above £50,270.

Type of NI Contribution Earnings Rate
Class 2 £6,515 - 9,568 £3.05/week
Class 4 £9,569 - £50,270 9%
Class 4 £50,271 and above 2%

If your profits are less than the Class 2 threshold, you don’t have to pay any National Insurance.

Voluntary National Insurance Contributions

If you’ve been on a low income or worked abroad there may be gaps in your NI contributions history, which could mean you don’t qualify for a full state pension when you reach retirement age. You may be able to remedy this by paying voluntary contributions to cover any gaps.

You can check if you have any gaps by checking your NI record online.

If you have gaps in your record, you may be able to make them up with either class 2 or class 3 voluntary contributions, depending on your situation. In 2021-22, Class 3 contributions are £15.40 a week, while class 2 contributions are £3.05 a week.

How do self-employed contractors pay National Insurance?

Your class 2 and class 4 NI contributions will be calculated when you complete your self-assessment tax return and you must make the payment, along with your income tax, by the 31st January.

If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com

Request a Call Back

 

edge promo