Class 4 National Insurance
National Insurance paid by self-employed individuals on their taxable profits, calculated as part of their Self Assessment tax return. The rate is 6% on profits between the Lower Profits Limit (£12,570) and the Upper Profits Limit (£50,270), and 2% on profits above that. Class 4 NI does not directly count towards contributory benefits in the same way as Class 1 NI.
How it works
Class 4 National Insurance is calculated automatically as part of your Self Assessment tax return, based on your trading profits for the year, so there is no separate form or registration process beyond completing your normal return accurately. Unlike Class 1 NI paid by employees, Class 4 does not directly build entitlement to contributory benefits such as the State Pension — that role is played by Class 2 contributions instead.
The 6% rate applies to profits between the Lower Profits Limit and the Upper Profits Limit, with a reduced 2% rate on profits above the Upper Profits Limit, mirroring the structure of employee Class 1 NI even though the two are calculated quite differently. Certain groups are exempt from Class 4 NI altogether, including people who have reached State Pension age at the start of the tax year, even if they continue working and earning profits.
Class 4 NI is paid alongside your income tax through the Self Assessment system, including any Payments on Account due by 31 January and 31 July, so it forms part of the same overall tax bill rather than being collected separately. Anyone with both employment and self-employment income in the same year should check the annual maximum rules, which can reduce Class 4 liability where Class 1 NI has already been paid on other earnings.
Example: Class 4 NI on £45,000 of profits
A self-employed trader with profits of £45,000 pays no Class 4 NI on the first £12,570 up to the Lower Profits Limit.
The remaining £32,430 falls below the Upper Profits Limit of £50,270, so it is taxed at 6%, giving Class 4 NI of £1,945.80 for the year.
Frequently asked questions
Does Class 4 National Insurance count towards my State Pension?
No. Class 4 does not directly build State Pension entitlement — that comes from Class 2 contributions or credits, even though Class 4 is paid on the same self-employment profits.
When is Class 4 NI paid?
It is calculated and paid through Self Assessment alongside your income tax, including any Payments on Account due by 31 January and 31 July.
Is anyone exempt from Class 4 National Insurance?
Yes. People who have already reached State Pension age at the start of the tax year are exempt, even if they continue trading and making a profit.
Related Terms
National Insurance
A system of compulsory contributions paid by employees, employers, and the self-employed that funds state benefits including the State Pension, Statutory Sick Pay, and Maternity Pay.
Class 1 National Insurance
National Insurance contributions paid by employees and employers on earnings above the Primary Threshold.
Class 2 National Insurance
A flat-rate National Insurance contribution historically paid by self-employed people to build entitlement to the State Pension and other contributory benefits.
Self Assessment
The system by which individuals report their own income, gains, and reliefs to HMRC each year through an online or paper tax return, rather than having tax collected automatically under PAYE.
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