National Insurance for the Self-Employed: A Founder’s Guide

For founders operating as sole traders, freelancers or partners, National Insurance is more than another figure on the annual tax bill. It can affect business cash flow, State Pension entitlement and access to certain contributory benefits.

The rules have also changed significantly in recent years. Most self-employed people no longer make compulsory weekly Class 2 payments.

Instead, Class 2 can be treated as paid when profits reach the relevant threshold, while Class 4 National Insurance remains a charge based on taxable business profits.

For the 2026/27 tax year, the Small Profits Threshold is £7,105. Class 4 National Insurance starts once taxable self-employed profits exceed £12,570.

Understanding how National Insurance contributions for self-employed founders work is particularly important when forecasting drawings, setting money aside for Self Assessment, running several businesses or combining employment with a growing side venture.

How Does National Insurance Work for Self-Employed Founders?

National Insurance is linked to a person’s employment status and earnings or profits.

A sole trader or individual partner is generally treated as self-employed and may come within the Class 2 and Class 4 rules.

A founder who operates through a limited company is in a different position. Owning a company does not automatically make the founder self-employed for National Insurance purposes. A company director taking a salary may instead pay employee Class 1 National Insurance through PAYE.

This distinction matters when founders compare the tax position of operating as a sole trader with incorporating a limited company.

For a self-employed person, the two main elements are:

Type	How It Works in 2026/27	Does It Build NI Entitlement?
Class 2	Usually treated as paid once profits reach £7,105	Yes
Voluntary Class 2	£3.65 a week where eligible and profits are below £7,105	Yes
Class 4	6% between £12,570 and £50,270, then 2% above £50,270	Primarily a tax-like contribution rather than the element that creates qualifying years

The important change is that founders should no longer assume that earning above the Small Profits Threshold means paying £3.65 every week.

What Are the Self-Employed National Insurance Rates for 2026/27?

The current thresholds apply from 6 April 2026 to 5 April 2027.

Annual Self-Employed Profit	Class 2 Position	Class 4 Position
Below £7,105	Nothing compulsory. Voluntary Class 2 may be available at £3.65 a week	None
£7,105 to £12,570	Class 2 treated as paid	None
Over £12,570 to £50,270	Class 2 treated as paid	6% on profit above £12,570
Over £50,270	Class 2 treated as paid	6% up to £50,270 and 2% above £50,270

HMRC calculates self-employed profits after allowable business expenses have been deducted from self-employed income.

That makes the difference between turnover and profit important.

A founder could generate £80,000 in sales but have £35,000 of allowable expenses, leaving £45,000 of taxable profit. Class 4 would normally be calculated using the £45,000 profit figure rather than the £80,000 turnover figure.

Class 2 Is Now Treated as Paid for Most Founders

This is one of the most important changes to understand.

If your self-employed profits are £7,105 or more in 2026/27, HMRC treats your Class 2 contributions as having been paid. You do not actually have to make weekly Class 2 payments simply because you have crossed that threshold.

This protects your National Insurance record without adding another compulsory weekly charge to your business costs.

For example, a sole trader making £9,000 of taxable profit in 2026/27 would normally:

Pay no compulsory Class 2 contribution, have Class 2 treated as paid for National Insurance record purposes, and pay no Class 4 because profits remain below £12,570.

By contrast, if profits fall below £7,105, Class 2 is neither payable nor automatically treated as paid. In that situation, voluntary Class 2 contributions may be worth considering where they would protect entitlement to the State Pension or certain benefits.

At £3.65 a week, 52 weeks of voluntary Class 2 would cost approximately £189.80 in 2026/27. Whether paying is worthwhile depends on the individual’s existing National Insurance record and circumstances.

How Much National Insurance Would a Founder Actually Pay?

Looking at the percentages alone can make Class 4 appear more complicated than it is.

Example 1: £10,000 Profit

A founder earns taxable self-employed profits of £10,000.

Because £10,000 is above the £7,105 Small Profits Threshold, Class 2 is treated as paid.

Because profits remain below £12,570, no Class 4 National Insurance is due.

Total compulsory self-employed National Insurance: £0

Example 2: £30,000 Profit

The calculation is:

Calculation	Amount
First £12,570 at 0%	£0
Remaining £17,430 at 6%	£1,045.80
Class 2 actually paid	£0
Total	£1,045.80

Class 2 is still treated as paid for the founder’s National Insurance record.

Example 3: £60,000 Profit

A founder earning £60,000 moves through both Class 4 bands.

Calculation	Amount
First £12,570 at 0%	£0
£37,700 at 6%	£2,262.00
Remaining £9,730 at 2%	£194.60
Class 2 actually paid	£0
Total Class 4	£2,456.60

The calculation shows why the 2% rate does not apply to the founder’s entire £60,000 profit. It applies only to the portion above £50,270. HMRC’s published rules use the same banded approach.

How Have Self-Employed National Insurance Rates Changed?

The system has changed substantially since 2021/22, which is why older articles and accounting spreadsheets can now produce misleading results.

Tax Year	Small Profits Threshold	Ordinary Class 2 Weekly Rate	Class 4 Lower Limit	Main Class 4 Rate	Rate Above Upper Limit
2021/22	£6,515	£3.05	£9,568	9%	2%
2022/23	£6,725	£3.15	£11,908	9.73%	2.73%
2023/24	£6,725	£3.45	£12,570	9%	2%
2024/25	£6,725	£3.45	£12,570	6%	2%
2025/26	£6,845	£3.50	£12,570	6%	2%
2026/27	£7,105	£3.65	£12,570	6%	2%

The table needs some context.

In 2021/22, Class 2 was still ordinarily payable once the relevant profit threshold was crossed.

During 2022/23 and 2023/24, people within part of the lower profit range could have Class 2 treated as paid while higher earners still had an actual Class 2 liability.

From 6 April 2024, compulsory Class 2 payments were effectively removed for most self-employed people. Those above the relevant Small Profits Threshold can instead have contributions treated as paid.

That historical change is why wording such as “self-employed people pay £3.65 per week in Class 2” is misleading when describing the current system.

What If You Run More Than One Self-Employed Business?

Founders increasingly earn income through several activities.

Someone might operate a marketing consultancy, sell digital products and run an eCommerce store at the same time. For tax reporting purposes, separate self-employment pages may be required for separate trades.

However, Class 4 National Insurance is normally based on the total taxable profits from the person’s trades, subject to any applicable adjustments.

For example, assume a founder makes £9,000 taxable profit from consulting and £18,000 from an online business.

The activities may have separate accounting records, but combined taxable profits are £27,000. The founder should therefore not assume that each activity gets its own £12,570 Class 4 threshold.

This is particularly important when several individually modest income streams become a significant overall business income.

What If You Are Employed and Self-Employed at the Same Time?

A founder can have a PAYE salary and run a separate business.

For 2026/27, most employees pay Class 1 National Insurance at 8% on weekly earnings between £242 and £967, with a 2% rate above £967. Self-employed Class 4 operates separately at 6% between £12,570 and £50,270 of relevant profits and 2% above that level.

The position can therefore look like this:

Income Source	Main NI Treatment
PAYE Salary	Class 1 deducted through payroll
Sole Trader Profit	Class 4 through Self Assessment
Self-Employment Above SPT	Class 2 generally treated as paid
Limited Company Director Salary	Usually Class 1 payroll rules rather than self-employed Class 4

There are rules that limit National Insurance in some multiple-income situations. HMRC can determine the overall amount due after the Self Assessment return has been filed, and refunds may be available where National Insurance has been overpaid.

Founders with substantial PAYE earnings alongside a profitable side business should therefore avoid assuming that simply adding the headline Class 1 and Class 4 percentages will always produce their final liability.

Do Special National Insurance Rules Apply to Certain Types of Work?

Not every income-producing activity follows the standard sole-trader rules.

HMRC specifically identifies landlords, examiners and similar roles, ministers of religion and certain investment activities as areas where different rules can apply. Share fishermen also have special arrangements.

Activity	National Insurance Point to Check
Landlords	Property income does not automatically follow ordinary self-employed NI rules
Examiners, Moderators And Invigilators	Special Class 4 arrangements can apply and payment may need to be arranged outside Self Assessment
Exam Question Setters	Can fall within the same Special Class 4 system
Ministers Of Religion Without A Salary Or Stipend	May not have compulsory NI but can potentially make voluntary contributions
Personal Investment Activity	NI may not apply where investing is not carried on as a business and no fee or commission is received
Share Fishermen	Special contribution rules and rates apply

For 2026/27, HMRC lists the special Class 2 rate for qualifying share fishermen as £4.30 a week.

Founders with an unusual occupation or mixed type of income should therefore check the relevant HMRC treatment rather than automatically applying the normal Class 4 calculation.

What Happens When a Self-Employed Founder Reaches State Pension Age?

Older explanations often say National Insurance simply stops as soon as somebody reaches State Pension age.

For self-employed people, the timing is more nuanced.

Class 2 is generally treated as paid only up to the week in which the individual reaches State Pension age. Class 4 may still be payable on trading profits for the whole tax year in which State Pension age is reached.

That matters for founders who continue operating a consultancy, shop or other business while transitioning into retirement.

The safest approach is to plan using the tax year rather than assuming Class 4 disappears from the birthday on which State Pension age is reached.

How Does National Insurance Affect the State Pension?

National Insurance records help determine entitlement to the State Pension.

People normally need at least 10 qualifying years to receive any new State Pension.

The number required for the full amount is commonly 35 for people whose National Insurance record began after the new State Pension system was introduced, although people with earlier records can have a different calculation.

For founders, years with low profits can therefore matter.

If profits are at least £7,105 in 2026/27, Class 2 being treated as paid can protect that year’s record without requiring a cash contribution.

If profits are below £7,105, however, it is worth checking the National Insurance record before automatically deciding whether to pay voluntary contributions.

HMRC’s online service shows contributions, National Insurance credits, gaps and whether filling a gap could improve the State Pension forecast. check your National Insurance record

Paying voluntary contributions is not automatically worthwhile in every case, particularly where the individual already has sufficient qualifying years or could receive credits another way.

Can Childcare Protect a Founder’s National Insurance Record?

National Insurance credits are sometimes overlooked when founders reduce their hours to care for family members.

Specified Adult Childcare Credits can allow an eligible family member who cares for a child under 12 to receive Class 3 National Insurance credits transferred from the child’s parent or main carer, provided the parent or carer does not need those credits themselves.

Imagine a self-employed grandparent who normally makes £20,000 profit but reduces work substantially to care for a grandchild while the child’s parent returns to work.

If the grandparent’s profit falls below the Small Profits Threshold, they should not immediately assume that paying voluntary Class 2 is their only way of protecting the year.

Where the conditions are satisfied, Specified Adult Childcare Credits could potentially protect the National Insurance record instead.

There is only one transferable credit associated with each Child Benefit claim, so family circumstances need to be checked carefully.

Why Does Class 2 Matter for Maternity Allowance?

Class 2 is no longer a routine cash payment for most self-employed founders, but it continues to matter for Maternity Allowance.

For a self-employed claimant, the relevant period is normally the 66 weeks before the baby is due.

To receive the maximum Maternity Allowance available under the self-employed rules, GOV.UK states that the claimant generally needs to have been registered as self-employed for at least 26 weeks in that 66-week period and have sufficient Class 2 contributions for at least 13 weeks.

Timing can create an unusual problem.

Suppose a baby is due in August 2026. Part of the 66-week test period falls within a tax year for which the founder’s final self-employed profit has not yet been confirmed through Self Assessment.

That means contributions which will eventually be treated as paid may not yet be reflected in the record when the Maternity Allowance claim is being assessed.

Where necessary, HMRC can arrange for Class 2 contributions to be paid early or through a lump-sum payment so that the claimant can satisfy the contribution requirements.

If the eventual tax calculation shows that Class 2 should have been treated as paid because profits were sufficiently high, the early contribution can potentially be refunded.

For founders planning parental leave, this is a strong reason not to leave National Insurance checks until after the baby is born.

How Can National Insurance Affect New-Style ESA?

Class 2 can also affect entitlement to New Style Employment and Support Allowance where a self-employed person becomes unable to work because of illness or disability.

The usual contribution conditions are more specific than simply having “paid some National Insurance”.

Broadly, a claimant normally needs 26 weekly contributions paid in one of the two relevant complete tax years, together with 50 weeks of contributions paid or credited in each of those two years. Exceptions can apply.

For example, for certain claims made in December 2026, the relevant contribution years can be 2023/24 and 2024/25.

This illustrates why a founder’s National Insurance record should be viewed as more than a State Pension record. Gaps can also affect access to contributory support while the person is still working age.

What Was the HMRC Class 2 Error for 2024/25?

Some self-employed taxpayers received incorrect Class 2 charges for the 2024/25 tax year because of an HMRC system error.

Affected taxpayers could see Class 2 National Insurance included on their Self Assessment calculation even though their profits meant Class 2 should have been treated as paid rather than actually charged.

HMRC identified and fixed the error, with affected records expected to have been corrected by 31 December 2025. Where an incorrect Class 2 amount had already been paid, HMRC’s approach was to refund it or use it as a credit against outstanding Self Assessment tax.

Founders reviewing older tax records should therefore investigate unexpected 2024/25 Class 2 charges rather than assuming every historic HMRC calculation must be correct.

When Do Founders Need to Register and Pay National Insurance?

National Insurance is generally dealt with through Self Assessment.

The registration trigger should not be confused with the National Insurance profit thresholds.

The £1,000 trading allowance is based on gross trading income, while Class 2 and Class 4 thresholds are based on relevant profits.

A sole trader whose gross trading income exceeds £1,000 will normally need to consider Self Assessment registration even if expenses later reduce the actual taxable profit significantly.

For someone becoming liable during the 2026/27 tax year, the normal registration deadline would be 5 October 2027. There are exceptions, including circumstances where someone with income of £1,000 or less may still choose or need to register.

Founders unsure about the starting point can check exactly when a business needs to register with HMRC.

There is also a more detailed explanation of how the £1,000 self-employed income rules work, which is useful because the trading allowance and National Insurance thresholds perform different jobs.

For a conventional 2026/27 Self Assessment return, the online filing and balancing-payment deadline will normally be 31 January 2028.

How Does Making Tax Digital Change the Process?

National Insurance rates themselves are not changed by Making Tax Digital for Income Tax, but the way many sole traders keep records and report their business figures is changing.

MTD for Income Tax started applying from 6 April 2026 to qualifying sole traders and landlords whose qualifying income for 2024/25 exceeded £50,000.

The threshold then falls to more than £30,000 from 6 April 2027, based on 2025/26 qualifying income, and more than £20,000 from 6 April 2028, based on 2026/27 qualifying income.

The threshold is based on qualifying gross self-employment and property income, not the taxable profit figure used to calculate Class 4.

Founders within the system need compatible software, digital records and quarterly updates, although the normal tax-payment timetable continues.

Businesses approaching these thresholds should understand how Making Tax Digital changes tax reporting before choosing bookkeeping processes or accounting software.

Income Tax and National Insurance Are Not the Same Thing

A founder’s Self Assessment bill can contain several liabilities, but National Insurance and Income Tax remain separate calculations.

For 2026/27, the standard Personal Allowance remains £12,570. For taxpayers in England, Wales and Northern Ireland, the main Income Tax rates are 20%, 40% and 45% across the relevant bands. Scottish earned-income rates are different.

The Personal Allowance also starts reducing by £1 for every £2 of adjusted net income above £100,000 and is eliminated once adjusted net income reaches £125,140.

That means £12,570 appearing in both Income Tax and Class 4 rules does not make the two charges interchangeable.

The £1,000 trading allowance is another separate concept.

For founders building tax forecasts, it helps to distinguish clearly between gross turnover, allowable expenses, taxable business profit, taxable income, Income Tax and National Insurance rather than treating the Self Assessment bill as a single percentage of revenue.

How Can Founders Budget for National Insurance?

National Insurance should be built into cash-flow forecasting rather than calculated for the first time shortly before the January payment deadline.

A practical founder routine is to:

Reconcile business income and allowable expenses regularly, estimate taxable profit as the year develops, monitor whether profits are approaching £7,105, £12,570 or £50,270, keep PAYE and self-employed earnings separate where both exist, check the National Insurance record periodically, review voluntary contributions before paying them, and update the forecast when profit changes materially.

For founders subject to payments on account, the January cash requirement can also be larger than the current year’s balancing amount alone, which makes maintaining a tax reserve particularly important.

HMRC also provides a Self Assessment calculator that can estimate Income Tax and Class 4 National Insurance using estimated income figures, although the available calculator may initially be configured for the previous completed tax year rather than 2026/27.

What About the Married Woman’s Reduced National Insurance Rate?

A very small number of people can still be affected by historic elections allowing married women and widows to pay reduced-rate National Insurance.

These elections date from before 1977 and should not be confused with today’s Class 2 voluntary contribution system.

For a founder who also has employment income and believes an historic election still applies, HMRC forms CF9 for married women and CF9A for widows can be used to check the position or give up entitlement to the reduced rate.

It is a niche issue, but one that can matter when reconciling Class 1 employment contributions with other income.

What Should Founders Take From the 2026/27 Rules?

The most important shift is that Class 2 is no longer a routine weekly business expense for most self-employed founders.

A founder making at least £7,105 of self-employed profit can normally have Class 2 treated as paid, while actual Class 4 liability does not begin until profits exceed £12,570.

That simplifies part of the system, but it does not remove the need to monitor National Insurance.

Low-profit years, several trades, PAYE employment, unusual occupations, maternity planning, illness, childcare responsibilities and reaching State Pension age can all change the practical position.

For business owners, the best approach is to treat National Insurance as part of annual financial planning rather than simply another deduction appearing when the Self Assessment bill arrives.

Frequently Asked Questions

Do Self-Employed People Still Pay Class 2 National Insurance?

Most do not make compulsory Class 2 payments. In 2026/27, people with self-employed profits of at least £7,105 normally have Class 2 treated as paid. Those below that level may be able to pay voluntary Class 2 at £3.65 per week.

At What Profit Do Self-Employed People Start Paying National Insurance?

Actual Class 4 National Insurance starts when taxable self-employed profits exceed £12,570 in 2026/27. Between £7,105 and £12,570, no Class 4 is due and Class 2 is normally treated as paid.

How Much National Insurance Would I Pay on £30,000 Self-Employed Profit?

For 2026/27, Class 4 would normally be 6% of the £17,430 above the £12,570 Lower Profits Limit, producing a Class 4 bill of approximately £1,045.80.

Is the £7,105 Threshold Based on Turnover or Profit?

It is based on relevant self-employed profit, not gross turnover. Business expenses therefore affect whether the threshold is reached.

Do I Pay National Insurance Separately for Two Businesses?

You may need separate tax-return information for separate trades, but Class 4 is normally calculated using total taxable profits from the person’s trades, subject to applicable adjustments.

Do I Pay Both Class 1 and Class 4 If I Have a Job and a Business?

Potentially, yes. Class 1 can be deducted from employment income while Class 4 applies to qualifying self-employed profit. Special overall maximum and adjustment rules can apply, so the final liability may need to be determined through Self Assessment.

Does National Insurance Stop Immediately at State Pension Age?

Not necessarily. Class 2 is normally treated as paid only until the week State Pension age is reached, but Class 4 can still apply to profits for the entire tax year in which State Pension age is reached.

Can I Pay National Insurance Voluntarily If My Business Makes Very Little Profit?

Potentially. If 2026/27 profits are below £7,105, voluntary Class 2 may be available at £3.65 per week. Before paying, check whether the contribution would actually improve your State Pension or benefit entitlement.

Does a Limited Company Founder Pay Self-Employed National Insurance?

Not simply because they own the company. A director receiving salary through the company may instead fall under Class 1 employee and director National Insurance rules. Dividend income also does not operate in the same way as sole-trader profits for Class 4 purposes.

Can National Insurance Affect Maternity Allowance?

Yes. For self-employed claimants, Class 2 contribution history within the 66-week test period can affect the amount of Maternity Allowance available. Where necessary, HMRC can deal with contributions that have not yet been reflected through Self Assessment.