Understanding Class 2 and Class 4 National Insurance

National Insurance (NI) can be one of the most confusing parts of the self-employed tax system, especially with recent changes. Here is how it works for the 2026/27 tax year.

Class 2 NI: The Basics

Class 2 NI used to be a flat weekly rate paid by almost all sole traders. Its primary purpose is to build up your qualifying years for the State Pension and other benefits.

The Big Change: From April 2024, the government effectively abolished mandatory Class 2 NI payments.

• If your profit is above £6,725 (Small Profits Threshold): You are treated as having paid Class 2 NI to protect your State Pension record, but you don't actually have to pay anything.
• If your profit is below £6,725: You don't have to pay, but you might want to make voluntary Class 2 payments (£3.45 a week) to ensure that year counts towards your State Pension.

Class 4 NI: The Percentage

Class 4 NI is paid as a percentage of your profits. It doesn't give you any additional benefit entitlements—it is essentially just an extra tax on self-employed earnings.

For the 2026/27 tax year, you pay:

• 0% on profits under £12,570
• 6% on profits between £12,570 and £50,270
• 2% on profits over £50,270

This is calculated alongside your Income Tax when you complete your annual Self Assessment tax return.

How do you pay it?

Both Class 2 (if paying voluntarily) and Class 4 NI are calculated and paid through your Self Assessment tax return. You don't need to make separate monthly payments to HMRC during the year.

Why Class 4 feels like “extra tax”

Class 4 is calculated on profit alongside Income Tax, but it does not buy extra State Pension credits beyond what the system already gives you through profits above the small-profits threshold. That is why many accountants describe it as operating like an additional slice of income-related contribution rather than a separate benefit you can point to on a statement.

Class 2, by contrast, has historically been the lever that turned a year of low profit into a qualifying year for pension purposes — which is why voluntary Class 2 at a flat weekly rate was attractive for people with patchy income. Policy has shifted; the habit of checking your NI record annually is more important than memorising the old brand names of each class.