Advanced Taxation (UK) · National insurance contributions for employed and self-employed persons

Class 4 NIC for the Self-Employed: Rates and Calculation

Updated 11 October 2026 · Fact-checked

Class 4 NIC is a national insurance charge on the taxable trading profits of self-employed individuals and partners. For 2025/26 you pay 6% on profits from £12,571 to £50,270 and 2% above that. You calculate it on the tax-adjusted profit and pay it through self assessment.

Understand Class 4 NIC for the Self-Employed

Class 4 NIC is a charge on the profits of a self-employed person. It is separate from income tax, but it is worked out on the same trading profit. It gives no extra benefit entitlement. Think of it as an additional tax on trading profits.

The charge works in bands, like income tax. There is a lower band that is nil rated, a main band and an upper band. The tax tables give these for the exam: nil on profits up to £12,570, 6% on profits from £12,571 to £50,270, and 2% on profits above £50,270.

The profits used are the taxable trading profits for the tax year. That means profits after adjustment for tax and after capital allowances, and after any trading loss relief that applies to them. Personal allowance is not deducted. Other income, such as dividends or interest, is ignored. Only trading profit counts.

Class 4 is assessed and collected through self assessment, together with the income tax. It is included on the tax return and is due with the income tax balancing payment and the payments on account. A partner is charged on their own share of the partnership profit, not on the whole firm's profit.

In ATX you often use Class 4 in planning. You compare it with employed NIC (Class 1 employee and employer) or with a company route. Class 4 is usually a lower total cost than Class 1 employee plus employer NIC on the same amount, so status and structure questions rely on it.

Key rules to remember

Class 4 on profits up to the lower limit: £1 – £12,570 × 0% = nil; The first £12,570 of taxable trading profits bears no Class 4.
Class 4 main rate band: (lower of profits and £50,270 − £12,570) × 6%; Maximum charge in this band is £37,700 × 6% = £2,262.
Class 4 upper rate: (Profits − £50,270) × 2%; Applies only if profits exceed £50,270.
Total Class 4: Band 1 charge + band 2 charge; Use the tax year's taxable trading profits, per person, before personal allowance.

How to solve Class 4 NIC for the Self-Employed questions

Use this method for any Class 4 question. Work each person separately.

1Identify who is chargeable: sole trader or each partner. Use each person's own share of profit.
2Find the taxable trading profits for the tax year. Use the adjusted profit after capital allowances and after any loss relief set against the trading profit.
3Ignore the personal allowance and all non-trading income.
4Compute the charge: 6% on profits between £12,570 and £50,270.
5Compute the charge: 2% on profits above £50,270.
6Add the two bands to give the Class 4 liability.
7State that it is collected through self assessment with the income tax, and add any link to the question such as Class 2 or planning.

Quickest way: Two-band shortcut

When to use it: Use when profits are given and you only need the Class 4 figure.

If profits are £50,270 or less: (profits − £12,570) × 6%.
If profits exceed £50,270: £2,262 + (profits − £50,270) × 2%.
If profits are £12,570 or less: nil.
Check that you used the right person's profit.

Common mistakes in Class 4 NIC for the Self-Employed

Deducting the personal allowance before computing Class 4.
Students treat it like income tax.
Fix: Class 4 is on taxable trading profit with no allowance. Use the NIC limits only.
Including dividends, interest or property income in the Class 4 base.
They use total income from the income tax computation.
Fix: Use trading profit only.
Charging the whole partnership profit instead of each partner's share.
They rush from the firm's adjusted profit.
Fix: Allocate profit first, then compute Class 4 for each partner.
Applying 6% to all profits above £12,570 with no upper rate.
They forget the £50,270 limit.
Fix: Split the profits into the two bands every time.
Using profits before capital allowances or losses.
They use the unadjusted accounting profit.
Fix: Start from taxable trading profits after allowances and loss relief against trading profit.
Saying Class 4 is paid separately to HMRC outside self assessment.
They confuse it with Class 1 under PAYE.
Fix: Say it is assessed and paid through self assessment with income tax.

Worked examples

Example 1

Sam is a sole trader with taxable trading profits of £42,000 for 2025/26. Compute his Class 4 NIC.

Show the solution

Profits are below £50,270, so only the 6% band applies.
Profits in band: £42,000 − £12,570 = £29,430.
Class 4 = £29,430 × 6% = £1,765.80.

Answer: Class 4 NIC is £1,765.80, paid through self assessment.

Example 2

Priya and Rohan are partners sharing profits 60:40. The partnership's taxable trading profits for 2025/26 are £150,000. Compute each partner's Class 4 NIC.

Show the solution

Priya's share: £150,000 × 60% = £90,000. Rohan's share: £150,000 × 40% = £60,000.
Priya: 6% × £37,700 = £2,262. Above £50,270: £90,000 − £50,270 = £39,730 × 2% = £794.60. Total = £3,056.60.
Rohan: £2,262 for the main band. Above £50,270: £60,000 − £50,270 = £9,730 × 2% = £194.60. Total = £2,456.60.

Answer: Priya £3,056.60 and Rohan £2,456.60, each collected through their own self assessment.

Exam tips

Write the limits from the tax tables at the top of your answer, then use them. It shows your working and earns method marks.
Show each band on a separate line. Markers give marks for each band.
In planning questions, compare total NIC cost for the sole trader and the alternative, such as employment or a company. Show both figures.
Always state that Class 4 is paid through self assessment. It is an easy mark.
Check which person's profit the question wants. Partnership questions often need an allocation first.

Practice questions from National insurance contributions for employed and self-employed persons

Class 4 NIC for the Self-Employed in other exams

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

ACCA Applied SkillsClass 4 NIC for the Self-Employed

Class 4 NIC for the Self-Employed: frequently asked questions

What are the Class 4 NIC rates for the self-employed in the ATX-UK tax tables?

The tables show nil on profits up to £12,570, 6% on profits from £12,571 to £50,270, and 2% on profits above £50,270. Use these on taxable trading profits.

Are Class 4 NIC paid through self assessment?

Yes. They are assessed on the tax return and paid with the income tax, including on the balancing payment date and any payments on account.

Does the personal allowance reduce Class 4 NIC?

No. Class 4 is calculated on taxable trading profits using its own limits. The personal allowance only affects income tax.

Is Class 4 charged on the whole partnership profit?

No. Each partner is charged on their own share of the partnership's taxable trading profit.