How much does Class 4 NIC cost?

There are currently two types of National Insurance contributions (NICs) payable by most self-employed people. These are known as Class 2 NICs and Class 4 NICs.

Class 2 NICs are paid by all self-employed taxpayers unless they qualify for the small earnings exception or other exemptions which remove the necessity to pay NICs. Class 2 NICs are payable at a flat weekly rate of £2.95 for the current 2018-19 tax year. Class 2 NICs count towards payments such as the basic State Pension, the employment and support allowance, maternity allowance and bereavement benefits.

In addition, most self-employed people are required to pay Class 4 NICs. The self-employed are required to pay Class 4 NICs (as well as to Class 2 NICs) if their profits are £8,424 or more a year. Class 4 NIC rates for the tax year 2018-19 are 9% for chargeable profits between £8,424 and £46,350 plus 2% on any profits over £46,350.

The Class 4 NIC rate is substantially lower than the corresponding rate for employees who pay National Insurance at 12% on the same income levels. Both the employed and self-employed pay 2% National Insurance contributions on income above the higher rate threshold.

In the Spring Budget 2017, an increase in the Class 4 NIC rate was announced by the Chancellor of the Exchequer, Philip Hammond. After political pressure from both sides of the house the increase was cancelled as the Chancellor agreed that the increase would break a key election manifesto commitment not to increase certain taxes. However, with the abolition of Class 2 NICs from April 2019 it would not be surprising if further changes are announced to Class 4 NICs in the not so distant future.

Posted in National Insurance

Exeter Accountant MJ Smith & Co

Celebrating 25 years of excellence.

Free 1st Meeting
Fixed Fees
Free Support!

Find out more

Client Portal Login

Forgot Password?

Latest News

Emails and letters from HMRC

HMRC continues to warn taxpayers about email phishing scams. Phishing emails are used by fraudsters to access recipients’ valuable personal …
Read More

Childcare voucher scheme issues

The Tax-Free Childcare Scheme (TFCS) was launched in April 2017 and opened to all remaining eligible families with children under …
Read More

Fixtures and fitting on transfer of ownership

The tax treatment of the sale of fixtures and fittings included in the sale or purchase of a commercial building …
Read More

Twitter Feed