TXF6 UK
Syllabus B. Income Tax And Nic Liabilities B6. National insurance contributions for employed and self-employed persons

B6a. Class 2 and 4 NIC

Contributions for the self employed

Class 2 NIC is £2.95 per week for 18/19.

The small earnings exemption is £6,205 which means that if the trading profits are below this figure no Class 2 NIC is payable.

If trading profits are above this amount then £2.95 is paid per week.

Profits £5,900 Profits £6,300
No Class 2 NIC payable because of small profits exemption Class 2 NIC payable = 52 weeks * £2.95 = £153

Class 4 NIC is payable by the self employed on behalf of their earnings

The rates of Class 4 NIC are 9% and 2%.

The rate of 0% is paid on profits below £8,424.
The rate of 9% is paid on profits between £8,425-£46,350 
The rate of 2% is paid on all profits over £46,350

NIC Paid by Paid on behalf of  Limits Rates
Class 4 Self employed Self employed cash earnings £0-£8,424
£8,424-£46,350
£46,350-onwards
0%
9% 
2%

Illustration

Calculate the NIC payable by Shobha if she is self-employed in 18/19 has selfemployed income of £47,000.

  • Solution 

    Class 2 NIC payable = £2.95 * 52 weeks = £153

    Class 4 NIC payable:
    £8,424 * 0% = £0
    £46,350-£8,424 = £37,926 * 9 % = £3,413
    £47,000 - £46,350 = £650 * 2% = £13

    Total Class 4 NIC payable = £3,426

    Total NIC payable £3,579