National Insurance for Self-Employed Tradespeople UK — What You Pay (2026)

National Insurance is one of those topics that confuses a lot of self-employed tradespeople — mainly because the rules changed significantly in April 2024, and a lot of information online hasn't caught up. This guide covers exactly what applies to you as a self-employed sole trader, what Class 2 and Class 4 mean in practice, how much you'll pay, and why it matters for your State Pension.

The two classes of NI you pay

As a self-employed person, you pay two types of National Insurance: Class 2 and Class 4. You do not pay Class 1, which is the employer and employee NI deducted from payroll — that applies to people employed by someone else. If you have employees of your own, you pay employer's Class 1 NI on their wages, but that is a separate liability entirely.

The distinction matters because each class has a different rate, a different threshold, and a different purpose. Class 2 is linked to your qualifying years for the State Pension and certain benefits. Class 4 is a straight percentage charge on your profits — it is, in effect, an additional income tax by another name.

Class 2 NI — what changed in April 2024

Before April 2024, Class 2 NI was a flat weekly charge of £3.45 per week (2023/24 rate) that most self-employed people paid as a mandatory contribution, calculated and collected through Self Assessment. Simple enough in principle, if slightly odd in practice.

From 6 April 2024, HMRC abolished the requirement to pay Class 2 NI separately. Here is how the new rules work depending on where your profits land:

• Profits above £12,570 (the Lower Profits Limit) — you automatically receive a Class 2 National Insurance credit and owe nothing for Class 2. Your State Pension record is protected as a qualifying year at no additional cost.
• Profits between £6,725 and £12,570 (above the Small Profits Threshold but below the Lower Profits Limit) — you still receive a Class 2 NI credit and your State Pension entitlement is protected, even though you pay nothing. This band is effectively a zero-cost qualifying year.
• Profits below £6,725 (below the Small Profits Threshold) — you do not automatically receive a credit. If you want this year to count toward your State Pension, you can choose to pay voluntary Class 2 contributions at £3.45 per week (2024/25 rate). This is optional but often worthwhile, especially if you are building up your qualifying years.

The practical takeaway: if your profits exceed £6,725, Class 2 NI costs you nothing from 2024/25 onwards and your pension record is protected. The only people who need to actively do anything are those with very low profits who want to voluntarily maintain their State Pension record.

Class 4 NI — the main charge for self-employed people

Class 4 NI is the substantive National Insurance charge for self-employed people. Unlike Class 2, it does not directly build your State Pension entitlement — it is simply a tax on your profits. The rates for 2024/25 are:

• 6% on profits between £12,570 and £50,270
• 2% on profits above £50,270

These rates are lower than they were before April 2024. The main rate dropped from 9% to 6% — a meaningful reduction for most tradespeople. The upper rate stayed at 2%.

You only pay Class 4 NI on profits. If your allowable business expenses bring your profit below £12,570, you owe no Class 4 NI at all. This is one reason why getting your expenses right matters — every legitimate expense you claim reduces both your Income Tax and your Class 4 NI bill.

How Class 4 NI is calculated — a worked example

Say your profit for the 2024/25 tax year is £40,000. Here is how Class 4 NI is calculated:

This £1,645.80 is on top of your Income Tax liability. At £40,000 profit, Income Tax (after the £12,570 personal allowance) would be 20% on the remaining £27,430 — another £5,486. Your combined tax and NI bill would be approximately £7,132 on £40,000 profit, an effective rate of around 17.8%.

For someone earning £60,000 profit, the upper Class 4 rate kicks in on profits above £50,270. The calculation would be 6% on the £37,700 band (£12,570 to £50,270), plus 2% on the £9,730 above £50,270.

When and how you pay Class 4 NI

Class 4 NI is calculated automatically by HMRC when you file your Self Assessment tax return. You do not pay it separately — it is bundled into your overall Self Assessment payment alongside Income Tax.

The payment deadlines are:

• 31 January — your balancing payment for the previous tax year, plus your first payment on account for the current tax year
• 31 July — your second payment on account for the current tax year

Payments on account are advance payments toward your next tax bill. HMRC assumes your income will be similar to the previous year, so it collects roughly half your liability in January and half in July. If your income drops significantly, you can apply to reduce your payments on account through your HMRC online account — do not simply stop paying, as interest accrues on unpaid amounts.

NI contributions and your State Pension

Your State Pension entitlement depends on how many qualifying years of National Insurance contributions you have built up over your working life. You need 35 qualifying years to receive the full new State Pension, which is £221.20 per week in 2024/25. You need at least 10 qualifying years to receive any State Pension at all.

Each tax year that your profits exceed £6,725 counts as a qualifying year (under the post-April 2024 rules). Years below that threshold do not automatically qualify — but you can plug gaps by paying voluntary Class 2 contributions at £3.45 per week, or voluntary Class 3 contributions at £17.45 per week (2024/25 rates).

Class 3 contributions are worth considering if you have gaps in your NI record from years before you went self-employed, or from years where your income was very low. At £17.45 per week (£907 per year), buying one additional qualifying year costs under £1,000 and adds roughly £6.32 per week to your State Pension for life. That is a payback period of under three years — almost always worthwhile.

You can check your NI record and see exactly how many qualifying years you have at gov.uk using your Government Gateway account. The tool also shows projected State Pension amounts and highlights any gaps you could fill.

Limited company directors — how NI works differently

If you operate through a limited company rather than as a sole trader, the NI picture looks quite different. Directors typically structure their pay as a combination of a low salary (just above the National Insurance threshold) and dividends.

On the salary element, the director pays Class 1 NI as both employer and employee. Employer's NI is 13.8% on salary above the Secondary Threshold (£9,100 per year in 2024/25) — this is a cost to the company. Employee's NI is charged at 8% on earnings between £12,570 and £50,270, and 2% above that.

The key advantage of the limited company structure: dividends are not subject to National Insurance. A director drawing £50,000 as a combination of £9,100 salary and £40,900 dividends pays significantly less NI than a sole trader earning £50,000 profit. This is one of the main reasons tradespeople incorporate when their profits grow — though the decision involves other costs and obligations that need to be weighed carefully.

CIS workers — how NI fits in

If you work as a subcontractor under the Construction Industry Scheme (CIS), your main contractor deducts either 20% (if you are registered and verified with HMRC) or 30% (if unverified) from your payments before passing the money to you.

These deductions are not your final tax bill — they are advance payments toward your Income Tax and Class 4 NI liability. When you file your Self Assessment tax return, you declare your gross CIS income (the full amount before deductions), calculate your actual Income Tax and NI liability based on your profit after expenses, and then offset the CIS deductions already made against that total.

If the CIS deductions exceed your actual liability — which often happens if you have significant allowable expenses or were on the 30% unverified rate — HMRC will issue a refund. Getting registered and verified as a CIS subcontractor (so you are deducted at 20% rather than 30%) and keeping good expense records are the two things that most directly reduce overpayment and improve your cashflow.

Mixed employment and self-employment — deferring NI

If you were also employed during part of the tax year — for example, you switched to self-employment mid-year, or you picked up some employed work alongside your trade — you may have paid NI through PAYE on your employment income as well as Class 4 NI on your self-employment profits. If the combined contributions exceed the annual maximum, you will have overpaid.

HMRC handles this through Self Assessment. When you file your return and enter both your employment income and your self-employment profit, the system calculates the correct combined NI liability and credits any overpayment against your bill or refunds it. You do not need to apply separately — it is resolved automatically through the return.

How to budget for tax and NI

The single most common financial mistake self-employed tradespeople make is not setting money aside for tax and NI as they earn it, then being caught short when the January bill arrives. The way to avoid this entirely is to treat tax as a cost of doing business — not an unexpected bill that arrives once a year.

A practical rule of thumb: set aside 25–30% of your net income into a separate ring-fenced account every time you are paid. This covers Income Tax and Class 4 NI combined for most basic-rate taxpayers. If your profits are higher and you are a higher-rate taxpayer, the figure should be closer to 35–40%.

The exact percentage depends on your total income, your allowable expenses, and whether you have other income sources. An accountant can calculate the precise figure for your situation at the start of each tax year, so you know exactly what to put aside each month.

Using a dedicated business bank account with a ring-fenced “tax pot” is the cleanest way to manage this. Several business banking apps allow you to automatically sweep a percentage of each incoming payment into a separate sub-account. When January arrives, the money is already there. No stress, no scrambling, no late payment interest.