If you want to find out how to calculate class 4 national insurance for the 2023-24 tax year so you can budget for your tax bill, keep reading.
In this guide, you’ll learn how class 4 national insurance is calculated and paid to HMRC by UK sole traders.
Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.
What is Class 4 National Insurance?
Class 4 National insurance is a type of UK tax that the UK self-employed pay as a percentage of their profits. It’s one of three taxes sole traders pay:
- Income Tax
- Class 2 National Insurance
- Class 4 National Insurance
Read this guide to learn more about how sole trader taxes are calculated.
If you are employed and self-employed you’ll pay class 1 national insurance through your payslip.
How is Class 4 National Insurance Calculated?
Sole traders pay Class 4 national insurance when their business profits go above a certain threshold – known as the lower profits limit.
Class 4 National Insurance for Tax Year* 2023-24: 9% on taxable profits between £12,570 to £50,270 and 2% thereafter
* the tax year runs from 6 April to 5 April
That means for the tax year 2023-24 you’ll pay class 4 national insurance once your profits exceed £12,570.
Here’s an Example of Calculating Self-Employed Class 4 NICs
You live in England and your taxable business profits were £40,000 for the tax year 2023-24. You’ll pay class 4 national insurance of £2,468.70 which is calculated as:
- 0% on the first £12,570
- 9% on the remaining £27,430
You’ll also pay class 2 national insurance and income tax.
How You Pay Class 4 NICs to HMRC
HMRC will calculate how much class 4 NICs you need to pay from the information you enter in the self-employment section of your online tax return. Your tax return is due by 31 January each year along with paying any tax and national insurance you owe.
Depending on your tax bill, you may also need to make a payment on account which will include an advance payment towards your next Class 4 NIC bill as well as your income tax.
Related:
- How to Complete The Self-Employment Section of Your Tax Return
- The 40% Tax Bracket (+ 3 Ways to Avoid It)
Historic Class 4 National Insurance Rates
| Tax Year | 2023-24 | 2022-23 | 2021-22 | 2020-21 |
|---|---|---|---|---|
| Lower profits limit (no NICs below this threshold) | £12,570 | £11,909 | £9,568 | £9,500 |
| Upper profits limit | £50,270 | £50,270 | £50,270 | £50,000 |
| Rate between lower and upper profits limit | 9% | 9.73% | 9% | 9% |
| Upper profits limit | £50,270 | £50,270 | over £50,270 | over £50,000 |
| Rate above upper profits limit | 2% | 2.73% | 2% | 2% |
