Guide to National Insurance

National Insurance

To qualify for certain benefits, such as maternity allowance and the state pension, you will need to pay National Insurance (NI) contributions.

Anyone aged 16 or over and an employee earning more than £242 per week from one job, will have to pay NI.

Class 1 contributions will be automatically deducted from an employee’s payslip.

Currently (2024 to 2025 tax year), these rates are as follows:

• 8% – if you earn £242 to £967 a week (or £1,048 to £4,189 a month)
• 2% – if you earn over £967 a week (or £4,189 a month)

Self-employed National Insurance

As a contractor earning over £6,725 a year, you will need to pay Class 2 NI contributions.

This is set at a fixed rate, which is currently £3.45 a week.

If, however, you earn less than £6,725 a year then you do have the option to pay voluntary Class 2 contributions.

If you earn over £12,570 a year, then you’ll also need to pay Class 4 NI.

The rates for these contributions are:

• 6% – on profits between £12,570 and £50,270
• 2% – on profits over £50,270

Those who are self-employed will need to pay for NI through their self-assessment tax return, which needs to be completed and paid for annually.

For more information and advice on this, take a look at our What is a Self Assessment Tax Return? page.

What if I’m self-employed and employed?

There are many people who are employed, but choose to supplement their earnings with self-employed work.

In this case, you will have Class 1 NI contributions deducted from your payslip as any other employee, but you may find that you then need to pay Class 4 NI for your self-employed work.

The amount you would have to pay out for this will all depend on how much you earn from your combined wages.

An accountant will be able to give you advice on this.

Finding an accountant

A good accountant will provide you with invaluable advice and guidance; they’ll be able to:

• Fill in and file forms, leaving you to concentrate on running your business.
• Ensure that you remain compliant with all your financial liabilities
• Help you to keep on top of important deadlines.
• Provide useful financial advice that you might not have been aware of.

Just make sure you do your research when it comes to finding a good accountant; there are plenty of accountancy companies out there, each offering different packages and benefits, so it’s best to look around.

Here are our top tips when it comes to looking for a good accountant:

• Do they specialise in contractor tax? To ensure you’re getting the right type of help and advice, you need to check that your accountant knows how contractor tax works. There will be a number of taxes and legislations that will only apply to self-employment so your accountant must understand this area completely.
• Will I have my own dedicated accountant? Having just one point of contact will be beneficial for you and your business, as it means you’ll receive personalised advice instead of being passed around a team.
• Are they qualified? It might surprise you to learn that an accountant is not required by law to have official qualifications, however, it might give you more peace of mind knowing that your accountant is qualified.
• Do they have a fixed monthly amount? Not every accountant works on a fixed monthly fee, so it’s worth finding out if yours does – otherwise, you could find yourself with a surprise bill at the end of the year. Check that their package includes everything you need, such as tax returns, VAT returns, payroll etc.
• Do they have a good reputation? It’s really important to do your research on any potential accountant to make sure that they are professional and can be trusted. Look for reviews and forums and speak to other self-employed workers.

Take a look at Our Services page to see everything that we can offer you as an award-winning accountancy company.

If you’re interested in changing your accountant, our Switching Accountants page provides further information on this.

If you’d like to sign up or need any further information, please give us a call on 01442 795 100 or you can email jaime.thorpe@dolanaccountancy.com. There’s also the option to contact us via live chat.