Paying your National Insurance Contributions If You’re Self Employed

If you are self employed, you will have to make sure that you are paying the correct National Insurance contributions. Whilst your employer will normally look after this if you are in a salaried job, self-employed people have to look after their own National Insurance payments.

You pay National Insurance contributions in order to build up your entitlement to state benefits, such as the State Pension. You stop paying National Insurance contributions when you reach State Pension age.

I am self employed. Do I have to pay National Insurance contributions?

If you are self-employed, aged 16 or over and your earnings are above a certain level; you will have to pay National Insurance contributions until you reach State Pension age.

Some people also pay voluntary National Insurance contributions. For example, you might choose to pay them if you:

• Live overseas and want to maintain your entitlement to a State Pension
• Are not working and are not claiming benefits
• Haven’t paid enough National Insurance contributions in a certain year to qualify for certain state benefits

What state benefits depend on my National Insurance contributions?

Your National Insurance contributions affect your entitlement to a number of state benefits, including:

• Contribution based Jobseeker’s Allowance
• The State Pension
• Contribution based Employment and Support Allowance
• Bereavement Allowance

I am self employed. How much National Insurance do I pay?

The amount and type of National Insurance contributions you pay depends your self-employment and how much you earn. The rates shown below are for the 2011-12 tax year.

If you’re self-employed you will pay Class 2 and Class 4 National Insurance contributions. The rates are:

• Class 2 National Insurance contributions are paid at a flat rate of £2.50 a week
• Class 4 National Insurance contributions are paid as a percentage of your annual taxable profits. You pay 9 per cent on profits between £7,225 and £42,475, and a further 2 per cent on profits over that amount
• Voluntary contributions (usually Class 3 National Insurance contributions) are paid at a flat rate of £12.60 a week

If your profits are expected to be less than £5,315 you may not have to pay Class 2 National Insurance contributions.

When do I pay my National Insurance contributions?

From April 2011, your Class 2 National Insurance contributions payments will become due on 31 January and 31 July. You pay Class 2 National Insurance contributions either monthly or six monthly by Direct Debit.
You pay Class 4 National Insurance contributions when you pay your Income Tax.

Class 3 voluntary contributions are paid either monthly by Direct Debit or by quarterly bill. You can also make one-off payments of voluntary contributions to fill gaps in your National Insurance contributions record.

When do I stop paying National Insurance contributions?

If you are self-employed, you stop paying Class 2 contributions as soon as you reach State Pension age. You stop paying Class 4 contributions from the start of the tax year after the one in which you reach State Pension age.

State Pension age is 65 for men born before 6 April 1959 and 60 for women born before 6 April 1950 – bear in mind though that the State Pension age will rise to 65 for women between 2010 and 2020.

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