If you’ve ever, say, accidentally dislocated your shoulder while rock climbing, you’re probably familiar with (and grateful for) A&E.
But what you might not know is that the NHS and its services are partially funded by National Insurance contributions (NICs) – basically a kind of tax that most working people pay.
For those who are new to freelancing, finding out that you need to pay National Insurance may come as a surprise in your first year of business. While PAYE employees usually have their contributions automatically deducted from their paycheck by their employers, freelancers are responsible for calculating and paying their NICs on their own as part of their Self Assessment.
The good news is that you can plan ahead for your NICs by regularly putting aside money throughout the year, so you’re not hit with one huge bill you can’t cover.
Here’s everything you need to know:
- What is National Insurance?
- What does National Insurance pay for?
- How are NICs calculated for freelancers?
- Freelancer National Insurance Calculator
- Your National Insurance Number
- How to pay National Insurance contributions
- How to check National Insurance contributions
- Ditch the math – use Hnry
What is National Insurance?
National Insurance is a cornerstone of the UK’s welfare state, functioning as a type of social security. It was first introduced with the National Insurance Act in 1911 as a contributory insurance scheme to protect workers and their families against illness and unemployment.
It was later expanded by the Labour government in 1948, and since then has grown into a means-tested system providing a wide range of benefits, including the state pension and support for the NHS.
National insurance contributions (NICs) are essentially a form of tax. Whether you’re employed or self-employed, between 16 and state pension age, you’re on the hook for paying NICs once you hit specific earnings or profit thresholds.
What does National Insurance pay for?
Some of the money gathered from NICs is allocated to the NHS first, then shifted to the National Insurance Fund. The cash in this fund is strictly for spending on social security benefits. The state pension is the biggest benefit it covers. In 2022-2023 it cost more than £110 billion – a whopping 95% of what the fund paid out.
What this means is that once you reach state pension age, provided you have enough qualifying years where you paid NICs, you’ll be eligible to receive pension payments for the rest of your days. Cheers to that!
How are NICs calculated?
There are four different classes of National Insurance contributions, ranging from Class 1 to Class 4.
- Class 1 contributions are paid by your employer if you have a job
- Class 2 contributions apply to self-employed people earning up to £12,570
- Class 3 contributions are for those who aren’t working, but want to cover gaps in their National Insurance record so they’re still eligible for certain benefits
- Class 4 contributions apply to self-employed earning over £12,570
For our purposes, let’s talk Class 2 and Class 4.
Class 2 contributions
Class 2 contributions were compulsory for freelancers over a certain earnings threshold – but this changed in early 2024.
From April 2024 onwards, freelancers no longer have to pay class 2 contributions, but there are different implications for this, depending on your earnings level:
- If you earn below £6,845 in profit annually, you have the option to pay voluntary Class 2 contributions if you want to avoid a gap in your contributions history. Your class 2 contributions are not treated as having been paid.
- If you earn between £6,845 and £12,570 in profit annually, your class 2 contributions will be treated as having been paid.
- If you earn above £12,570 in profit annually, your class 2 contributions will be treated as having been paid, but you’ll also have to pay class 4 contributions.
Class 2 contributions are charged at a flat rate of £3.50 per week for financial year 2025/26.
Class 4 contributions
Class 4 contributions are mandatory for anyone earning above £12,570 in profit. You’ll need to pay class 4 contributions on all profit above this threshold.
Class 4 contributions are calculated at a rate of 6% on profit between £12,570 and £50,270, and at a rate of 2% on any profit above £50,270.
Ok, so that was all a bit complicated. Let’s lay it out in a table:
| Profit | Class 2 Contributions | Class 4 Contributions |
|---|---|---|
| <£6,845 | Not required (although you can contribute voluntarily to avoid a gap in contribution | Not required |
| £6,845 - £12,570 | Treated as already paid | Not required |
| £12,570 - £50,270 | Treated as already paid | 6% on profit in this band |
| £50,270+ | Treated as already paid | 2% on profit in this band |
💡 Profits here means your total self-employed income, minus any business expenses.
Just a heads-up: If you have a job while also running your sole trader business, your employer will handle the class 1 contributions from your salary. Your freelance NICs will be calculated on your freelance profit only, not your total combined income.
Freelancer National Insurance Calculator
Finding or applying for your National Insurance number
To ensure your NICs and taxes are tracked uniquely to you, you’ll need a National Insurance number (NINo).
Finding your NINo
Typically, you’ll receive a letter with your national insurance number just before you turn 16, sent to the address on file with HMRC. This number is yours for life and is formatted with a combination of two letters, six numbers and a final letter, such as AB654321C.
You can locate your national insurance number in a few places:
- on a document you may already have, such as a P60, payslip or benefit letters
- in your personal tax account
- within the HMRC app
Both your personal tax account and the HMRC app provide the option to download a letter that displays your national insurance number, if you need it on paper!
If none of these options work for you, you can also use the government’s ‘find your national insurance number online’ service. Log in, create an account, prove your identity, and you’ll be sent a letter containing your NI number.
Applying for a NINo
If you’ve never had an NI number, you can apply for one on the government’s website provided that you:
- live in the UK
- have the right to work in the UK
- are working, looking for work, or have an offer to start work
How to pay National Insurance contributions
As a sole trader you pay your class 4 NICs annually together with your tax return via your Self Assessment.
To do this, you’ll need to register with HMRC as a sole trader via your Government Gateway account and complete the Self Assessment form, which asks you for details including your name, business name (if different), address and what your business does.
One thing to note: If you earn more than £50,000 in a tax year from April 2026 (£30,000 from 2027), you’ll need to use Making Tax Digital compliant accounting software (like Hnry!) to keep digital records, submit quarterly updates and file your tax return that way.
How to check national insurance contributions
As mentioned earlier, you need to pay NICs for a certain number of qualifying years to get the state pension when you reach retirement age. The number of years depends on your circumstances, including your gender and when you were born.
If you’re male and born before 1951 or female born before 1953, you’ll get the basic state pension and if you’re born after that time you’ll get the new state pension.
You can check your state pension age using this government website.
Keeping an eye on your National Insurance contributions record is a good idea. You can see what years you may have missed and may be able to make up some of them by paying voluntary national insurance contributions.
To check your records, including your eligibility for the state pension and an estimated forecast of payments, go to your HMRC online services account.
Hnry sorts it all for you
We’re an award-winning app and tax services, specifically designed for sole traders. For just 1% + VAT of your self-employed income, capped at £600 +VAT a year, Hnry will calculate and pay all your taxes and whatnot for you, including:
- Income tax
- VAT (if applicable)
- National Insurance Contributions
- Student loan repayments (if applicable)
- Private pension contributions (optional)
Our app models your income throughout the year and predicts your effective tax rate based on what you earn. We only ever deduct what we estimate you’ll owe, meaning you won’t get behind (or ahead!) on tax payments. You also won’t have to set money aside yourself – in fact, you’ll barely have to think about taxes at all.
Better still, using the Hnry platform costs less than using a traditional accountant, and is claimable as an allowable expense.
If that sounds good to you, join Hnry today and never think about tax again!
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