How Much Is Class 4 National Insurance in 2025?

Last Updated on: 20th September 2025, 09:59 am

Are you self-employed in the UK and wondering how much Class 4 National Insurance you’ll need to pay in 2025? You’re not alone. With tax rules evolving each year, staying up to date is key to managing your finances and fulfilling your legal obligations.

Class 4 National Insurance Contributions (NICs) apply when your self-employment profits exceed a specific threshold. These payments are separate from income tax and play a crucial role in how much you owe HMRC through Self Assessment.

In this guide, you’ll find clear answers to the most pressing questions around Class 4 NIC for the 2025–26 tax year. From how it’s calculated to payment methods and potential ways to reduce what you owe, everything is explained in detail. Whether you’re newly self-employed or have years of experience, this blog will help you navigate the 2025 rules with confidence.

What Is Class 4 National Insurance and Who Pays It?

Class 4 National Insurance is a mandatory contribution paid by self-employed individuals in the UK whose profits exceed the lower profits limit.

Unlike Class 2, which was previously paid weekly, Class 4 is based entirely on your annual taxable profits and is calculated as a percentage.

If you are:

• A sole trader
• A member of a business partnership
• Earning more than £12,570 in annual profits

You will be required to pay Class 4 NIC through the Self Assessment tax return system.

Class 4 NIC is structured into bands based on profit levels:

Class 4 NIC does not contribute towards state benefits such as the State Pension, Maternity Allowance, or Employment and Support Allowance. That role is generally covered by Class 2 contributions, which became voluntary from April 2024.

Even though Class 2 is now optional, Class 4 remains compulsory if your profits exceed the thresholds. If you’re under 16 or over state pension age, you won’t be required to pay.

It’s essential to understand how these NICs apply to your specific situation so you can budget effectively for your tax bill.

How Are Your Profits Calculated for Class 4 NIC?

To determine how much Class 4 National Insurance you owe, HMRC calculates your profits based on your taxable self-employment income. This amount is the figure after all allowable business expenses have been deducted from your gross income.

Here’s how it works:

• Step 1: Total your business income for the year
• Step 2: Subtract all allowable expenses, such as travel, equipment, rent, utilities, and subscriptions
• Step 3: The result is your taxable profit

The Class 4 NIC applies only to this final profit figure, not your total turnover.

Some key points to consider:

• If you run multiple self-employed businesses, the profits are combined before NIC is calculated
• You do not deduct your personal allowance when calculating NIC, only for income tax
• Any capital allowances or losses brought forward should be accounted for as they impact your final profit

If your taxable profits are below £12,570, you don’t need to pay Class 4 NIC at all. However, once you exceed this limit, HMRC applies the NIC rates to specific profit bands, and these contributions are automatically calculated through Self Assessment.

Always ensure your records are accurate and up to date. Using accounting software or working with a professional can help you stay compliant and avoid errors in your NIC calculation.

What Are the 2025 Class 4 NIC Rates and Thresholds?

For the 2025/26 tax year, Class 4 National Insurance Contributions follow a banded structure based on your taxable profits. These bands determine how much NIC you’ll pay and ensure fairness across different income levels.

Here are the thresholds and rates for 2025:

Key points to note:

• The lower profits limit for 2025/26 remains at £12,570
• The upper profits limit remains fixed at £50,270
• Income below the lower limit is exempt from Class 4 NIC
• Class 4 NIC is not eligible for any tax relief or reduction based on age, region, or business type

Unlike Class 2 contributions, which may be voluntary depending on your circumstances, Class 4 is always payable once your profits cross the lower threshold.

It’s crucial to plan ahead, especially if your income fluctuates. Keeping an eye on the £50,270 mark can help you anticipate when you’ll shift into the 2% band, which could significantly affect your total NIC liability for the year.

How Much Will You Pay in Class 4 National Insurance in 2025?

Understanding your Class 4 NIC liability starts with knowing exactly how it’s calculated. The system uses your taxable profits and applies the current year’s rates based on income bands. Here’s a step-by-step breakdown of how much you’ll owe.

Calculation Method Breakdown

First, calculate your total taxable profit after business expenses.

Then apply the following rates for the 2025/26 tax year:

• 6% on profits between £12,571 and £50,270
• 2% on profits over £50,270

Table of Class 4 NIC bands and rates

Class 4 NIC Examples Based on Profit Levels

Class 4 NIC is collected automatically as part of your annual Self Assessment. Make sure you budget for it throughout the year to avoid surprises when your tax bill arrives.

When and How Do You Pay Class 4 NIC?

Class 4 National Insurance is paid through the Self Assessment system alongside your income tax. There are no separate payment dates or forms just for NIC.

Here’s how it works:

• You report your self-employment income and allowable expenses on your tax return
• HMRC calculates your Class 4 NIC based on your declared profit
• Your NIC is combined with income tax in your total bill

Payment Deadlines:

• Due by 31 January after the tax year ends
• If required, payments on account are made by 31 January and 31 July

Payment methods include:

• Online or telephone banking
• Direct Debit via HMRC online
• Debit card or business credit card
• Standing order or Bacs
• At your bank (only if you have a physical paying-in slip)

Most people choose to pay their total tax bill, including Class 4 NIC, as a lump sum. However, you can also set up a budget payment plan to make smaller regular payments throughout the year.

Keeping on top of your payments will help you avoid late payment penalties and interest charges. Always file your tax return on time to ensure your NICs are recorded properly.

Does Class 4 National Insurance Affect State Benefits?

Class 4 National Insurance differs from Class 2 in a significant way, it does not count towards entitlement for most state benefits.

This means paying Class 4 NIC alone does not help you qualify for benefits such as the State Pension, Maternity Allowance, or Employment and Support Allowance (ESA).

While it’s a mandatory payment for those earning above the lower profits limit, it serves primarily as a revenue tool for the government and doesn’t contribute to your National Insurance record.

This is why many low-earning self-employed individuals opt to pay voluntary Class 2 NIC to maintain their eligibility for contributory benefits.

Here’s what you need to remember:

• Class 4 NIC does not earn NI credits
• It does not count towards the State Pension or ESA
• It is not refundable and does not provide personal entitlement

If you’re relying on National Insurance to qualify for benefits in the future, focus on paying Class 2 (if applicable) or ensuring you have sufficient Class 1 contributions from other employment. Planning ahead can ensure you’re not caught short when it’s time to claim.

What If You’re Both Employed and Self-Employed?

Many people in the UK have both employment income and self-employed income. In such cases, you might already be paying Class 1 National Insurance through your job, and also be liable for Class 4 NIC on your self-employment profits.

Here’s how it works:

• Class 1 NIC is deducted by your employer through PAYE
• Class 4 NIC is calculated on your self-employment income via Self Assessment
• The two systems operate independently of each other

However, the government sets an annual maximum limit on total NICs. If you hit that limit through Class 1 contributions alone, your Class 4 NIC may be reduced, but not eliminated. In such cases, you may only pay 2% on profits above the lower threshold, rather than the standard 6%.

Important considerations:

• The reduction applies only if your total NIC reaches the annual maximum
• HMRC automatically calculates any necessary adjustments when you submit your tax return
• No action is usually needed on your part if you file online and on time

If you believe you’ve overpaid, you can request a review by contacting HMRC. Balancing multiple income streams means extra attention is needed when managing your NIC liabilities. Keeping detailed records helps ensure you’re not paying more than you should.

Can You Reduce or Avoid Class 4 National Insurance?

Class 4 NIC is a mandatory contribution if your profits exceed the lower threshold, but there are legitimate ways to reduce your liability without breaking any rules.

The most effective method is through tax-efficient planning of your business expenses and structure. You cannot avoid Class 4 NIC simply by opting out.

However, you can:

• Maximise your allowable business expenses to reduce taxable profit
• Consider using the cash basis accounting method if you’re eligible
• Offset losses from previous years against current profits
• Claim capital allowances on qualifying equipment or business assets

If you’re approaching the threshold and can delay some invoicing or accelerate expenses before the tax year ends, you might reduce the total profit assessed for NIC.

Also, if you have a limited company, you do not pay Class 4 NIC, instead, you may pay Corporation Tax and employer/employee NICs on salaries. Choosing the right business structure can have long-term financial benefits.

It’s always best to consult a tax advisor or accountant before making any decisions. Proper planning can help you manage your NICs more effectively and legally reduce what you owe.

What’s Changing with National Insurance in 2025?

The 2025/26 tax year has brought stability in Class 4 NIC rates but also continues reforms introduced in earlier years. From April 2024, Class 2 NICs became voluntary, and this change remains in effect for 2025. Class 4 NICs, however, remain compulsory for profits over £12,570.

Key updates for 2025 include:

• Class 4 NIC thresholds remain unchanged: Lower limit at £12,570, upper limit at £50,270
• Rates remain stable 6% on mid-tier profits and 2% on profits above £50,270
• No direct contribution to state benefits via Class 4 NIC continues

There are no major increases in NIC rates or changes in band structures for Class 4 this year. However, the government has signalled future reviews of the NIC system for the self-employed, particularly around simplification and merging of NIC classes.

If you’re self-employed, keep an eye out for Budget announcements, as any changes in rates or thresholds could impact your take-home income. Planning ahead based on current legislation will help you stay tax-efficient and compliant in 2025.

Conclusion

Understanding how much Class 4 National Insurance you owe in 2025 is essential for staying compliant and planning your finances effectively.

As a self-employed individual in the UK, if your taxable profits exceed £12,570, you’ll be required to pay Class 4 NIC at 6% and 2% across different profit bands.

While it doesn’t contribute to state benefits, it remains a significant part of your overall tax liability. Knowing the calculation method, payment process, and how it interacts with Class 1 or Class 2 contributions can help you budget better and avoid unexpected bills.

By keeping accurate financial records and using professional support when needed, you can ensure that your NIC obligations are handled smoothly. Staying informed is the best way to keep more of your hard-earned money while fulfilling your responsibilities to HMRC.

FAQs

What are the current Class 4 National Insurance rates for 2025/26?

For 2025/26, Class 4 NIC is 6% on profits between £12,571 and £50,270, and 2% on profits over £50,270. No NIC is due on profits below £12,570.

Is Class 4 National Insurance the same as Class 2?

No, Class 4 is based on profit levels and is compulsory if thresholds are exceeded, while Class 2 is voluntary from April 2024. Class 2 contributes to state benefits, but Class 4 does not.

Do I have to pay Class 4 NIC if I earn less than £12,570?

No, you are not required to pay Class 4 NIC if your self-employment profits are below the lower profits limit. You may still choose to pay Class 2 voluntarily for benefit entitlement.

When is Class 4 National Insurance due for payment?

Class 4 NIC is due by 31 January following the end of the tax year, along with your income tax. If you make payments on account, part of your NIC may be paid earlier.

How is Class 4 NIC different if I’m both employed and self-employed?

You’ll pay Class 1 NIC through your employer and Class 4 NIC on self-employed income. HMRC will adjust Class 4 if you reach the annual NIC maximum limit.

Does Class 4 National Insurance give me access to any benefits?

No, Class 4 NIC does not entitle you to any state benefits. Only Class 2 or Class 1 NICs contribute to benefit entitlements like the State Pension.

Can I use software to calculate my Class 4 NIC automatically?

Yes, most Self Assessment tax software automatically calculates your Class 4 NIC based on your declared profits. This helps reduce errors and ensures compliance with HMRC rules.