Class 4 National Insurance contributions (NICs) in the United Kingdom are paid by self-employed individuals and are typically calculated and paid annually through the self-assessment tax system. Here’s when and how much Class 4 NICs to pay:
When to Pay:
Class 4 NICs are paid annually as part of your self-assessment tax return. The tax year in the UK runs from April 6th to April 5th of the following year. You need to report and pay your Class 4 NICs along with your income tax through the self-assessment process. The deadline for submitting your self-assessment tax return and making the payment is usually in January following the end of the tax year.
How Much to Pay:
The amount of Class 4 NICs you pay depends on your total profits from self-employment for the tax year. As of my last knowledge update in September 2021, here are the Class 4 NICs rates for self-employed individuals:
Class 4 NICs on Profits between the Lower Profits Limit and Upper Profits Limit: You pay Class 4 NICs at a rate of 9% on profits between the Lower Profits Limit and the Upper Profits Limit. For the 2021/22 tax year, the Lower Profits Limit was £9,568, and the Upper Profits Limit was £50,270.
Class 4 NICs on Profits above the Upper Profits Limit: You pay Class 4 NICs at a rate of 2% on profits above the Upper Profits Limit.
Please note that tax rates and thresholds can change from one tax year to another. It’s essential to check the current rates and thresholds with HM Revenue and Customs (HMRC) or a qualified tax advisor to ensure you are paying the correct amount.
You can calculate your Class 4 NICs by determining your total self-employed profits for the tax year and applying the appropriate rates. Make sure to keep accurate records of your income and expenses related to your self-employment, as this information will be needed when completing your self-assessment tax return.
It’s also important to meet the self-assessment tax return deadlines to avoid penalties. If you have any doubts or questions about your Class 4 NICs or self-assessment tax return, consider seeking advice from HMRC or a tax professional.
Some self-employed people do not pay National Insurance through Self-Assessment, but may want to pay voluntary contributions. These are:
· examiners, moderators, invigilators and people who set exam questions
· people who run businesses involving land or property
· ministers of religion who do not receive a salary or stipend
· people who make investments for themselves or others – but not as a business and without getting a fee or commission