National Insurance is the part of self-employed tax that confuses people most, largely because there are two “classes” and the rules changed recently. Here’s how it actually works for sole traders in 2025/26 — and why it matters for your State Pension.
The two types you’ll hear about
- Class 4 National Insurance — the main one. It’s charged as a percentage of your profits, alongside your Income Tax.
- Class 2 National Insurance — historically a small weekly flat-rate charge that built your State Pension. It’s now treated as paid (at no cost) once your profits are above the threshold.
The rates for 2025/26
| Threshold | Rate | |
|---|---|---|
| Class 4 (main rate) | £12,570 – £50,270 | 6% |
| Class 4 (upper rate) | Above £50,270 | 2% |
| Class 2 | Above £12,570 | Treated as paid (£0) |
So a sole trader pays 6% Class 4 on the slice of profit between £12,570 and £50,270, then just 2% above that — on top of their Income Tax. You can estimate yours with our free National Insurance calculator.
What changed with Class 2
Until recently, the self-employed paid a small weekly Class 2 charge to build their State Pension. From 2024/25, if your profits are above the £12,570 threshold, Class 2 is treated as paid automatically — you keep the State Pension benefit without the charge. That’s a genuine saving for most sole traders.
Why it matters for your pension
National Insurance isn’t just a tax — it builds your entitlement to the State Pension (you generally need 35 qualifying years for the full amount) and some benefits. That’s the catch for low-profit sole traders:
- If your profits are below £12,570, you don’t pay Class 4, and Class 2 isn’t charged automatically.
- But you may also not get a qualifying year towards your pension.
In that situation, you can choose to pay Class 2 voluntarily — a small annual amount that protects your record. For many low-profit sole traders it’s one of the best-value contributions you can make, and it’s easy to overlook.
How you pay it
You don’t deal with National Insurance separately. It’s worked out and collected through your Self Assessment return, alongside your Income Tax, and paid by 31 January. See our sole trader tax return guide for the full picture.
Getting it right
The rules around Class 2, voluntary contributions and your pension record are exactly the sort of thing that’s easy to miss on your own — and a missed qualifying year can quietly cost you in retirement. Our sole trader accountants check your National Insurance position as part of your tax return, so your pension is protected and you pay no more than you should.
Frequently asked questions
How much National Insurance does a sole trader pay?
What's the difference between Class 2 and Class 4 National Insurance?
Does National Insurance count towards my State Pension?
Do I pay National Insurance if my profits are low?
How do I pay sole trader National Insurance?
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Reviewed by Provense Accountants
Written and reviewed by our team of qualified accountants (AAT-regulated). This guide is general information, not personal tax advice — book a free consultation for advice on your situation.