NIC payable by the self-employed from April 2024

​A self-employed earner whose profits are below the small profits threshold is not liable to pay Class 2 National Insurance contributions, but can make voluntary contributions if they choose in order to maintain their state pension record.

This is a much cheaper option than paying Class 3 contributions.

The abolition of Class 2 contributions has been a long time coming.

Class 2 contributions were to have been abolished and Class 4 contributions reformed with effect from 6 April 2019 (having already been delayed a year).

Following a U-turn, the reforms were put on hold as a result of concerns that self-employed earners with low earnings would lose out.

However, the introduction of the lower profits threshold and a deemed zero rate on contributions between the small profits threshold and lower profits threshold has addressed this issue, paving the way for the abolition of Class 2 contributions.

Class 4 contributions

Class 4 contributions are profit-related contributions payable by self-employed earners.

Contributions are payable at the main Class 4 rate on profits between the lower profits limit and the upper profits limit, and at the additional Class 4 rate on profits in excess of the upper profits limit.

For 2024/25, the lower profits limit is £12,570 and the upper profits limit is £50,270, unchanged from 2023/24 and due to remain at this level until 5 April 2028.

For 2024/25, the main Class 4 rate is 8%, having been reduced from 9%. The additional Class 4 rate is 2%.

Building up pension entitlement for 2024/25 and beyond

With the abolition of Class 2 National Insurance contributions from 6 April 2024, self-employed earners will for 2024/25 onwards build up entitlement to the state pension and contributory benefits where their earnings exceed £12,570.

This is the point at which Class 4 contributions become payable.

However, self-employed with profits between £6,725 and £12,570 for 2024/25 will receive a National Insurance credit, earning them entitlement to the state pension and contributory benefits, despite not paying any National Insurance.

For 2024/25, self-employed earners with profits of less than £6,725 will still be able to make voluntary contributions at the 2023/24 Class 2 rate of £3.45 per week.

This will be much cheaper than paying Class 3 voluntary contributions, which are to remain at £17.45 per week for 2024/25.

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