PostHeaderIcon National insurance contributions

A self-employed individual is liable to pay two types of National Insurance Contributions (NICs):

  • Class 2 NICs
  • Class 4 NICs


Class 2 NICs are payable usually monthly by direct debit, or quarterly by cheque. The weekly rate of NICs is £2.40 for 2009/10. The National Insurance contributions office will contact you to set these payments up when you register as self-employed.


Class 4 NICs are charged as a proportion of your taxable profits. For 2009/10 the Class 4 NIC rate is 8% of your profits between £5,715 and £43,875 and 1% of profit above £43,875. These NICs are payable along with your income tax bill.


You can claim exemption from Class 2 or Class 4 NICs if you are over pension age (man aged 65, for women over 60).


Also, if your profits are below the Small Earning Exception (SEE) you can ask for exception from Class 2 NICs. The SEE for 2009/10 is £5,075 p.a. Note that this is an annual figure so if you are only trading for one month in the tax year the SEE limit is 1/12 of £5,075.

It is particularly likely that you might want apply for an exception if your self-employment is part-time and you also work as an employee.

You get SEE claim form from this link:
http://www.hmrc.gov.uk/selfemployed/fagcf10.shtml.


If you ask for and are granted exception, you are sent a Certificate of Exception. This means you do not have to pay NICs for three years (after that you will have to apply again if your profits are still below the SEE). If your profits exceed the small earnings limit during this period you should notify HM Revenue and Customs and start paying Class 2.

Find out more: http://www.hmrc.gov.uk/index.htm

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