Class 4 National Insurance — What UK Sole Traders Actually Pay in 2026/27

What is Class 4 National Insurance?

Class 4 National Insurance Contributions (NICs) are charged on the profits of self-employed people. Unlike employment, where your employer deducts NICs from your salary automatically, sole traders pay Class 4 through their Self Assessment tax return — alongside income tax.

This means you are not paying National Insurance monthly. You are paying it in January (and possibly July) along with your tax. Many sole traders are caught off guard because the bill is larger than expected.

Class 4 rates for 2026/27

The Class 4 rates for the 2026/27 tax year are:

Note: Class 2 NICs were abolished from 6 April 2024. You no longer pay the flat-rate weekly Class 2 charge. Class 4 is now the only NIC you pay as a sole trader (on profits above the threshold).

How Class 4 is calculated

Class 4 is charged on your net profits — income minus allowable expenses — not on your turnover.

Example: If your turnover is £60,000 and you have £18,000 of allowable expenses, your net profit is £42,000.

• Profits between £12,571 and £42,000 = £29,430 × 6% = £1,765.80
• Profits between £42,000 and £50,270 = £0 in this example (profit is below this threshold)

Your Class 4 liability for the year would be £1,765.80. Add this to income tax on the same profits to get your total Self Assessment bill.

Why the total bill surprises people

Income tax and Class 4 NIC are calculated on the same profit figure. On profits of £42,000:

• Income tax: Profits minus Personal Allowance (£12,570) = £29,430 × 20% = £5,886
• Class 4: £29,430 × 6% = £1,765.80
• Total: £7,651.80

If you made payments on account in July 2026 (based on your 2024/25 bill), these are deducted. But if your income has grown, the remaining balance — plus the first payment on account for 2026/27 — can feel large.

When do you pay?

Class 4 NICs are paid:

• 31 January 2027: Balancing payment for 2025/26 (including Class 4 on that year's profits), plus first payment on account for 2026/27
• 31 July 2027: Second payment on account for 2026/27

Payments on account are estimated payments toward next year's bill. Each is half of your previous year's total tax and NIC bill.

Setting money aside as you go

The standard recommendation is to set aside 25-30% of your profits into a separate savings account throughout the year. This covers income tax and Class 4 NIC for most basic-rate taxpayers. Higher-rate taxpayers earning above £50,270 should set aside closer to 40-45%.

Monthly bookkeeping makes this easier — when your Profit and Loss is accurate every month, you know your profit and can calculate your approximate liability in real time.

What Class 4 does not cover

Class 4 NICs do not count toward State Pension entitlement in the same way that Class 2 used to. Since Class 2 was abolished in 2024, sole traders now need at least 10 qualifying years of NICs (from employment or voluntary contributions) to receive any State Pension, and 35 qualifying years for the full amount.

If you have gaps in your NIC record, you can make voluntary Class 3 contributions to fill them. Check your NIC record on the Government Gateway (gov.uk/check-national-insurance-record).