Sending your tax return doesn’t just deal with income tax though, and your bill can also include any National Insurance that you owe on your self-employment income. In this article we’ll explain how National Insurance works for self-employed people.

What is National Insurance?

Anyone aged 16 or over, up until they reach State Pension age, pays National Insurance on any employment or self-employed income they get over a specific amount.

This wording is quite important, because not all types of income are subject to National Insurance. For instance, dividends, and sometimes even rental income you get from property if this isn’t your main business, can be free from NI.

Why do I need to pay National Insurance if I work for myself?

Making NI contributions gives you entitlement to certain benefits and the State Pension. National Insurance contributions also help to fund the NHS.

How much NI will I need to pay?

There are different types of National Insurance, known as classes, and these have different thresholds and rates. The type you pay depends on how much you earn from a particular source of income. For instance, employees normally pay Class 1 NI on income they earn from an employer, whereas self-employed people pay Class 4 NI.

Class 4 National Insurance for self-employed people

Class 4 NI is charged as a percentage of the profits you make from being self-employed.

• Lower Profits Limit (LPL): You’ll pay NI at a rate of 6% on any profits you earn in 2025/26 and 2026/27 which are over the £12,570 Lower Profits Limit
• Upper Profits Limit (UPL): You’ll then pay Class 4 NI at a rate of 2% on any profits over £50,270

What happens if I don’t pay NI?

Paying Class 4 NI is mandatory if your profits reach the threshold, but not everyone will earn enough to reach it. If your profits are above the Small Profits Threshold (£7,105 in 2026/27, or £6,845 for the 2025/26 tax year) then you’ll get NI ‘credits’, which protects your entitlement. If your profits are below it, then you might consider making voluntary contributions to cover any gaps.

For self-employed people this means making Class 2 contributions (which used to be compulsory, but are now voluntary) at a flat rate of £3.50 per week for the 2025/26 tax year, or £3.65 for 2026/27.

How do I register to pay self-employed National Insurance?

You’re automatically signed up for National Insurance and any other tax contributions that you need to make when you register for Self Assessment with HMRC.

When and how do I pay my NICs?

HMRC will use the information you provide in your Self Assessment tax return to work out your tax bill. The total amount will consist of any income tax and National Insurance you owe, as well as any other taxes you need to pay.

The deadline to submit your tax return and pay the bill for Self Assessment is 31st January following the end of the tax year that you need to report. You can submit your return much earlier, but this doesn’t affect the payment deadline – which can be useful if you need to budget for it!

 
Find out more about getting support with your finances and tax in our guide to finding the right accountant.

The post How Self-Employed People Make National Insurance Contributions appeared first on The Cheap Accountants.

This time of year is really popular for people to become new business owners, so we wanted to give newbie freelancers a helping hand.

The main things to consider are:

• Income tax
• National Insurance Contributions
• Business expenses
• Self Assessment
• Bookkeeping

If you’ve never had any experience with these things before, don’t panic! This blog post will hopefully clear a few things up for you.
 

Income tax

Let’s start with the main one. Income tax is the same kind of tax you pay as an employee through PAYE, but if you become self-employed, you’ll have to do it differently. It won’t directly come out of your earnings, you’ll have to work it out and do it all yourself.

The percentages are the same as with employment. So, it’s 20% for earnings between £12,570 and £50,270. Between £50,270 to £125,140 is 40% and over that, it’s 45%.

However, please note that these figures can change at the start of a new tax year (every April) – so always check for up to date figures!
 

National Insurance

This is slightly different when you go self-employed. As an employee, you will be used to paying Class 1 NI. However, now it’ll be Class 4.

Class 4 is for profits over £12,570 and under £50,270. This is set at 6% of profits. For earnings over £50,270 it’s 2%.

National Insurance is something that will need to be put on your Self Assessment tax return, along with all details of your income, for Income Tax purposes too.
 

Expenses

Now for the good news. You can reduce your profit figures – but this is a good thing!

If you’re paying a percentage of your profits in tax, naturally having a lower profit figure will equal less tax to pay.

A lot of people get a bit apprehensive about this bit but don’t worry. We’re not talking about dodgy tax dealings, this is just a legitimate way to ensure you’re not paying more tax than you need to. Every business does it, and HMRC expects you to claim for expenses.

Basically, anything you earn that you spend back on the business is not profit. It’s an expense and should therefore be deducted from your profits.

The way it works is: Earnings – expenses = profit

So, it’s really important you keep track of all business expenses and keep receipts and invoices, should HMRC ever ask for them. Just make sure what you’re claiming for is solely for the purpose of doing business. Anything that doesn’t look right could spark a HMRC investigation.
 

Self Assessment

This is how you record all your income and expenses for HMRC. You will need to submit a Self Assessment tax return by January 31^st each year and also pay what you owe by then.

Please don’t wait until the deadline to get everything done though!

First of all, you’ll need to register for Self Assessment. This needs to be done by October 5^th in your business’ second tax year. It can easily be done online on the government’s website.
 

Bookkeeping

In order to keep track of all your incomings and outgoings, you’ll need to put a bookkeeping system in place. A lot of people still swear by spreadsheets, but we’d definitely recommend trying out some bookkeeping software instead.

Modern bookkeeping software will automate a lot of processes for you, which saves time and reduces errors. Having cloud-based bookkeeping is also handy if you’re on the move a lot because you can access things remotely.

Overall, things are easier than they sound. The most important thing is to get organised and read up on what you need to do. Make sure you keep good records and do everything above board, and you’ll keep on HMRC’s good side.

Do you have any questions about the information above? Are you looking for an accountant who can handle it all for you? Get a free quote for low-cost accountancy services.

The post A Newbie Freelancer’s Guide to Tax, NI and Expenses appeared first on The Cheap Accountants.