Class 4 National Insurance Explained: Rates, Thresholds Guide 2026/27

A Self Assessment bill can surprise freelancers, sole traders and contractors because Class 4 National Insurance appears alongside Income Tax. Class 4 is separate from Income Tax and is generally calculated using relevant self-employed profits.

For 2026/27, this guide explains Class 4 NIC rates, thresholds, profit calculations, Class 2 and the position of people who are both employed and self-employed.

What Is Class 4 National Insurance?

Class 4 National Insurance is a profits-based National Insurance contribution for people who are self-employed. It normally applies to sole traders, freelancers, contractors, consultants and members of partnerships whose relevant profits exceed the Lower Profits Limit.

Unlike employee Class 1 National Insurance, which is normally deducted through PAYE, Class 4 is generally calculated through Self Assessment. It is separate from Income Tax, even though both can use figures from the same business.

An important distinction is that Class 4 NIC does not build your State Pension record. That role is connected with Class 2 rules and National Insurance credits, not the amount of Class 4 you pay.

Class 4 NIC Rates and Thresholds for 2026/27

For the 2026/27 tax year, the Class 4 National Insurance rates are:

| Relevant self-employed profits | Class 4 rate |
| Up to £12,570 | 0% |
| £12,570 to £50,270 | 6% |
| Above £50,270 | 2% |

The Class 4 National Insurance threshold begins at £12,570. No Class 4 is charged on profits up to that level. Once profits exceed £12,570, the 6% rate applies only to the portion within the main band.

After profits exceed £50,270, the rate falls to 2% on the amount above that threshold. This does not mean the entire profit is charged at 2%. Different portions fall into different bands.

Is Class 4 Based on Profit or Turnover?

This is a common misunderstanding. Class 4 National Insurance is generally based on relevant profits, not gross turnover.

Suppose a freelancer invoices £40,000 and has £10,000 of allowable business expenses. The relevant profit may be £30,000. The Class 4 calculation is therefore based on the relevant profit, subject to the rules applying to that person.

Allowable professional fees, insurance, qualifying travel, office costs and certain equipment can affect profit. Personal spending is not a business expense simply because it was paid from a business account.

Class 4 National Insurance Calculation Examples

A few examples make the bands easier to understand.

With £20,000 of profit, £7,430 falls within the 6% band. The Class 4 amount is £445.80.

With £40,000 of profit, £27,430 is charged at 6%, producing £1,645.80.

With £55,000 of profit, £37,700 is charged at 6%, producing £2,262. The remaining £4,730 is charged at 2%, adding £94.60. The total is £2,356.60.

With £100,000 of profit, the 6% band produces £2,262. The remaining £49,730 is charged at 2%, adding £994.60. The total is £3,256.60.

The rates apply only to the relevant portions of profit.

What Is the Difference Between Class 2 and Class 4?

Understanding Class 2 National Insurance is important because people often assume Class 4 protects their State Pension directly.

For 2026/27, where self-employed profits are at least the Small Profits Threshold of £7,105, Class 2 contributions are treated as paid for National Insurance record purposes. You generally do not make an actual Class 2 payment.

If profits are below £7,105, there is normally no compulsory Class 2 payment, but voluntary Class 2 contributions can be available. The 2026/27 voluntary rate is £3.65 a week.

Paying Class 4 above £12,570 does not itself create a State Pension qualifying year.

What If You Are Employed and Self-Employed?

Many people have a PAYE job while also running freelance work or a side business. Paying Class 1 National Insurance through employment does not automatically remove Class 4 obligations on self-employed profits.

HMRC considers the combined position under the applicable rules, including Class 1 contributions already paid. Special calculations can apply when someone has both employment earnings and self-employed profits, particularly at higher income levels.

This is a recurring question in UK personal finance discussions. The answer depends on the full circumstances, so mixed employment should be entered accurately on the Self Assessment return.

How Is Class 4 Paid?

For most self-employed people, Class 4 NIC is calculated as part of Self Assessment. You provide the relevant business income, expenses and other required information, and HMRC determines the amount due.

The normal Self Assessment payment deadline is 31 January following the end of the relevant tax year. Depending on your circumstances, you may also have to make payments on account towards the following year's liability.

Payments on account are advance payments, not an extra tax charge, but they can make the first January bill look higher than expected.

Common Class 4 National Insurance Mistakes

Several misunderstandings appear repeatedly among new self-employed taxpayers.

First, Class 4 National Insurance is not calculated on turnover. Profit is the starting point.

Second, Class 4 NIC is not Income Tax. They are separate charges.

Third, paying Class 4 does not automatically give you a State Pension qualifying year.

Fourth, having a PAYE job does not necessarily remove Class 4 liability from self-employed work.

Finally, the 2% rate above £50,270 applies only to the slice above that threshold.

Final Takeaway

For 2026/27, Class 4 National Insurance is charged at 6% on relevant self-employed profits between £12,570 and £50,270, with 2% applying above £50,270. Profits up to £12,570 have a 0% Class 4 rate.

The biggest lesson is simple: focus on profit, not turnover, understand the difference between Class 2 and Class 4, and remember that National Insurance and Income Tax are separate calculations.

For freelancers and small business owners, knowing these figures before filing can make a Self Assessment bill much less intimidating. See News will continue to track UK tax and National Insurance developments so self-employed readers can make informed financial decisions. These figures support better planning throughout each year.