Class 4 National Insurance for the Self-Employed: 2026/27 Guide
Everything self-employed people need to know about Class 4 NI — rates, thresholds, when it applies, how it's collected, and how it differs from Class 2.
Class 4 National Insurance is one of the two taxes self-employed people pay on their profits — the other being income tax. Unlike income tax, which most people have some familiarity with, Class 4 NI is often misunderstood. People confuse it with Class 2 (which it's entirely different from), aren't sure what it contributes to (spoiler: nothing benefit-related), and sometimes don't budget for it correctly.
This guide explains exactly what Class 4 NI is, how it's calculated for 2026/27, and how it fits into your overall tax picture as a sole trader.
What Class 4 NI is — and what it isn't
Class 4 National Insurance is a profits-based levy on self-employment income. It is not the same as employee National Insurance (Class 1), which is deducted from employment wages. It is also not the same as Class 2 NI, which was a flat weekly charge that built entitlement to the State Pension.
Class 4 NI is purely a tax on profits. It does not contribute to any benefit entitlement — not the State Pension, not Employment and Support Allowance, not Maternity Allowance. Those benefits are built through Class 2 contributions (or through your NI record from employment). Class 4 is simply an additional levy on self-employment profits that generates revenue for general government expenditure.
This matters practically: if you're thinking about your State Pension entitlement, it's Class 2 you need to focus on, not Class 4. See the Class 2 NI Calculator for details on how your NI record is built through self-employment.
The 2026/27 rates and thresholds
For the 2026/27 tax year, Class 4 NI applies as follows:
| Profit level | Rate | |---|---| | Up to £12,570 (Lower Profits Limit) | 0% | | £12,570 to £50,270 (Upper Profits Limit) | 6% | | Above £50,270 | 2% |
The Lower Profits Limit aligns with the personal allowance (£12,570), so you begin paying Class 4 NI at the same profit level at which income tax begins. The Upper Profits Limit aligns with the higher rate income tax threshold (£50,270).
Example — profits of £35,000:
- On profits between £12,570 and £35,000: £22,430 × 6% = £1,345.80
- On profits above £35,000: £nil (below the upper limit)
- Total Class 4 NI: £1,345.80
Example — profits of £70,000:
- On profits between £12,570 and £50,270: £37,700 × 6% = £2,262
- On profits above £50,270: £19,730 × 2% = £394.60
- Total Class 4 NI: £2,656.60
Use the Class 4 NI Calculator to model your exact position.
How Class 4 NI is collected
Class 4 NI is collected through Self Assessment, alongside your income tax. It appears on your Self Assessment return as a separate line item — HMRC calculates it automatically based on the profit figure you declare. You don't need to calculate it yourself, although understanding it helps you budget accurately during the year.
Because Class 4 NI is collected through Self Assessment, it follows the same payment deadlines as income tax:
- 31 January — balancing payment for the previous tax year, plus first payment on account toward the current year
- 31 July — second payment on account toward the current year
Payments on account include both income tax and Class 4 NI. HMRC calculates each payment on account as 50% of the previous year's combined income tax and Class 4 NI liability.
Class 4 NI and the interaction with income tax
The combination of income tax and Class 4 NI determines your effective total rate as a sole trader. For profits in the basic rate band:
- Income tax: 20%
- Class 4 NI: 6%
- Combined rate: 26% on profits between £12,570 and £50,270
For profits in the higher rate band:
- Income tax: 40%
- Class 4 NI: 2%
- Combined rate: 42% on profits between £50,270 and £125,140
This combined rate is why sole traders at higher profit levels often consider operating through a limited company, where the combination of corporation tax, director salary, and dividends can produce a lower overall tax rate. The Ltd vs Sole Trader Calculator models this comparison at your profit level.
Class 4 NI if you also have employment income
If you have both self-employment income and PAYE employment income, there are limits on the total NI you pay. NI contributions across all sources are subject to an annual maximum. If your employment income already takes you above the Upper Earnings Limit (£50,270 for Class 1 purposes), HMRC will reduce the amount of Class 4 NI you pay — specifically, the 6% rate applies only to the portion of self-employment profits that, combined with your employment income, falls within the band.
HMRC recalculates this automatically through Self Assessment. In practice, if you earn £40,000 in employment and have £20,000 in self-employment profits, the 6% Class 4 rate applies only to the portion of self-employment profits that, when added to employment income, falls below £50,270. The calculation is done for you, but it's worth understanding so you don't double-budget for NI that won't actually be charged.
Historical context: the 2024 rate reduction
Class 4 NI was cut from 9% to 8% in April 2024, and then further to 6% in April 2024 as part of a government commitment to reduce the NI burden on self-employed workers. This represented a significant shift: a sole trader earning £35,000 in profits saves around £672 per year compared to the pre-April 2024 rate of 9%.
The 2% rate on profits above £50,270 has remained unchanged throughout these reforms.
Budgeting for Class 4 NI
When setting aside money for your tax bill throughout the year, budget for both income tax and Class 4 NI together. A rough rule of thumb for profits in the basic rate band:
- Keep back 26–28% of all earnings above your personal allowance to cover income tax (20%) and Class 4 NI (6%)
- For profits above £50,270, budget for 42% on the excess
The Self Assessment Estimator gives you a combined figure including both income tax and Class 4 NI, updated for the 2026/27 rates, so you can track your liability throughout the year.
Class 4 vs Class 2 — the key distinction
To summarise the difference clearly:
| | Class 2 | Class 4 | |---|---|---| | Basis | Weekly flat rate | % of profits | | Rate 2026/27 | £3.50/week (voluntary) | 6%/2% on profits | | Builds benefits? | Yes (State Pension, ESA, etc.) | No | | Collected via | Self Assessment | Self Assessment | | Who pays? | Those with profits below SPT who choose to | All with profits above £12,570 |
If your profits are above £12,570, you pay Class 4 NI automatically. The question of whether to pay Class 2 is only relevant if your profits are below £6,725 — see the Class 2 NI Calculator for guidance on voluntary contributions.
Rates updated for 2026/27
All Indietax calculators reflect the rates and thresholds for the 2026/27 tax year (6 April 2026 to 5 April 2027), including the personal allowance freeze, Class 4 NI at 6%, and the £500 dividend allowance.