Skip to content

Taxation (UK) · Income from self-employment

Class 4 and Class 2 NIC for the Self-Employed

Updated 11 October 2026 · Fact-checked

Class 4 NIC is charged on a sole trader's or partner's taxable trading profits for the tax year. It is nil on the first £12,570, 6% on profits from £12,571 to £50,270, and 2% above £50,270. Work out each band separately and add them. Class 2 is not a compulsory charge in TX-UK calculations.

Understand Class 4 and Class 2 National Insurance Contributions

Self-employed people pay National Insurance on their profits, not on wages. The main charge is Class 4 NIC. It is a percentage of the profits from your trade, and it is collected through the self-assessment system together with income tax.

Class 4 works in bands, like income tax. The first £12,570 of profits is charged at nil. Profits from £12,571 to £50,270 are charged at 6%. Profits of £50,271 and above are charged at 2%. The 6% band is therefore £37,700 wide (£50,270 − £12,570).

The profit figure is your taxable trading profit for the tax year: adjusted profit after capital allowances, and after any trading loss relief that reduces it. It is not reduced by your personal allowance, other income or pension contributions. For a partner, use only that partner's own share of the profit.

Class 2 NIC was the old flat weekly charge on the self-employed. ACCA's table of rates and allowances for this exam lists Class 1, Class 1A and Class 4 only, and gives no Class 2 rate. So in a TX-UK question you calculate Class 4 and do not charge compulsory Class 2. Anyone can still pay Class 2 voluntarily, but the rate is not given in the exam, so you would not be asked to calculate it.

Class 4 NIC is not an allowable deduction for income tax. It is a separate charge with its own bands. Keep it apart from the income tax computation.

Key rules to remember

Class 4 NIC: nil band
Profits £1 to £12,570 per year × 0% = nil
No Class 4 is due on profits up to this level.
Class 4 NIC: main band
(lower of profits and £50,270 − £12,570) × 6%
Maximum profit in this band is £37,700. Applies to profits £12,571 to £50,270.
Class 4 NIC: upper band
(Profits − £50,270) × 2%
Only on profits of £50,271 and above. Do not apply 2% to total profits.
Total Class 4
Main band NIC + upper band NIC
Round to the nearest £ at the end, as the exam instructions allow.
Class 2 NIC
No compulsory charge; no rate in ACCA's table
Do not invent a rate. Class 4 is the self-employed NIC you calculate.

How to solve Class 4 and Class 2 National Insurance Contributions questions

Use this method for any Class 4 question. It takes about two minutes.

  1. 1Find the taxable trading profit for the tax year. Start from adjusted profit, deduct capital allowances and apply any loss relief that reduces trading profit. For a partner, use their share.
  2. 2If profits are £12,570 or less, Class 4 is nil. Stop.
  3. 3Take the profit between £12,571 and £50,270, capped at £37,700, and multiply by 6%.
  4. 4If profits exceed £50,270, take the excess and multiply by 2%.
  5. 5Add the two figures to get total Class 4 NIC. Round to the nearest £.
  6. 6Show the bands as separate lines in your working so marks are given even if you slip on one figure.
  7. 7State that Class 2 is not charged, if the question mentions it. Do not deduct NIC in the income tax computation.

Quickest way: Band shortcut for Class 4

When to use it: Use in Section A or B objective questions where you only need the final NIC figure.

  1. If profit is £50,270 or less: (profit − £12,570) × 6%.
  2. If profit is above £50,270: £2,262 + (profit − £50,270) × 2%. The £2,262 is £37,700 × 6%.
  3. Check the answer sits between nil and a sensible value, for example £2,262 at £50,270 profit.
  4. Make sure you used trading profit after capital allowances, not the figure given at the start.

Common mistakes in Class 4 and Class 2 National Insurance Contributions

  • Using the profit before capital allowances or before loss relief.

    The question gives adjusted profit early and students use it straight away.

    Fix: Always reduce to the taxable trading profit for the tax year first, then apply the bands.

  • Applying 2% to the whole of the profit above £12,570, or 6% to everything.

    Students forget the rates apply to bands, not to the whole profit.

    Fix: Split into the £37,700 band at 6% and only the excess over £50,270 at 2%.

  • Using the employee Class 1 rate of 8% instead of 6%.

    Class 1 and Class 4 share the same thresholds, so the rates get mixed up.

    Fix: Self-employed main band is 6%. Employee Class 1 main band is 8%.

  • Reducing profit by the personal allowance or other income before computing NIC.

    Students treat NIC like income tax.

    Fix: The nil band is a fixed £12,570 threshold. NIC is based on trading profit only.

  • Charging Class 2 NIC as well.

    Older study notes show a weekly flat-rate Class 2 charge.

    Fix: ACCA's table gives no Class 2 rate. Calculate only Class 4 for the self-employed.

  • Deducting Class 4 NIC when computing taxable income.

    Students assume NIC is a business expense.

    Fix: Class 4 is not deductible for income tax. Show it separately.

Worked examples

Example 1

Amir is a sole trader. His taxable trading profit for the tax year is £30,000. Calculate his Class 4 NIC.

Show the solution
  1. Profit is above £12,570, so some NIC is due.
  2. Profit is below £50,270, so only the 6% band applies.
  3. Profit in the 6% band = £30,000 − £12,570 = £17,430.
  4. NIC = £17,430 × 6% = £1,045.80.
  5. Round to the nearest £: £1,046.

Answer: Class 4 NIC is £1,046.

Example 2

Priya's adjusted trading profit is £68,000. Capital allowances are £3,000. Calculate her Class 4 NIC for the tax year.

Show the solution
  1. Taxable trading profit = £68,000 − £3,000 = £65,000.
  2. Main band: (£50,270 − £12,570) = £37,700 × 6% = £2,262.
  3. Upper band: £65,000 − £50,270 = £14,730 × 2% = £294.60.
  4. Total = £2,262 + £294.60 = £2,556.60.
  5. Round to the nearest £: £2,557.
  6. No Class 2 is charged.

Answer: Class 4 NIC is £2,557.

Exam tips

  • Show the 6% and 2% bands as separate working lines in Section C. It protects method marks.
  • Check the profit figure first. Capital allowances and loss relief can change it, and objective questions often hide this in the scenario.
  • Remember the objective question is all or nothing. Recheck the band arithmetic: £37,700 × 6% = £2,262.
  • If a question mentions Class 2, answer from the ACCA table: no rate is given and there is no compulsory charge to compute.
  • For partnerships, compute Class 4 separately for each partner on their own share of profit.

Practice questions from Income from self-employment

Class 4 and Class 2 National Insurance Contributions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Class 4 and Class 2 National Insurance Contributions: frequently asked questions

How do I calculate Class 4 NIC in the ACCA TX-UK exam?

Take the taxable trading profit for the tax year. Charge nil on the first £12,570, 6% on profits up to £50,270, and 2% on any profit above that. Add the bands and round to the nearest £.

Is Class 2 NIC still payable by the self-employed?

ACCA's tax rates and allowances for this exam give no Class 2 rate, so you do not calculate a compulsory Class 2 charge. Class 4 is the self-employed NIC you work out in TX-UK.

Is Class 4 NIC tax deductible?

No. Class 4 NIC is not deducted when computing taxable trading profit or taxable income. It is a separate charge on the profits.

Does the personal allowance affect Class 4 NIC?

No. Class 4 is based on trading profits and its own bands. The personal allowance only affects income tax.