NI Class 1 vs Class 4 — Self-Employed Contributions in 2026
National Insurance contributions for the self-employed are split into two classes. The 2024 reforms removed Class 2 for most. In 2026 the calculation is simpler — but the link to State Pension entitlement deserves understanding.
The Current 2026 Structure
For employees (Class 1):
- 8% on earnings between £12,570 and £50,270
- 2% on earnings above £50,270
For self-employed (Class 4):
- 6% on profits between £12,570 and £50,270
- 2% on profits above £50,270
Note: Class 1 employee rate (8%) is higher than Class 4 self-employed rate (6%). Self-employed contributions are also lower than 1980s/90s rates — successive governments have closed the gap with employees.
What Happened to Class 2?
For 2024–25 onwards, Class 2 contributions were abolished for most self-employed. Previously, if your profits exceeded the Small Profits Threshold (£6,725), you paid £3.45/week (~£179/year) for Class 2 — which entitled you to State Pension and certain benefits.
Now: if your profits exceed £6,725, you receive State Pension credits automatically without paying Class 2. The actual contribution requirement starts at higher thresholds.
If your profits are below £6,725, you can still voluntarily pay Class 2 contributions to fill in State Pension gaps. This is the cheapest way to buy State Pension credits — at £179/year per qualifying year, an extra year of State Pension (roughly £303/week in 2026) takes about 14 weeks to pay back.
State Pension Entitlement
To get a full State Pension in 2026, you need 35 qualifying years of National Insurance contributions or credits. Each qualifying year is worth roughly £303/week × 1/35 of full pension = ~£8.66/week in State Pension.
The strategy implication: never lose a qualifying year unnecessarily. If your self-employment year fell below the threshold, voluntary Class 2 (£179) buys a year for life. The break-even point is reaching State Pension age and living about 4–5 months.
Voluntary Class 3 — The More Expensive Option
If you have a gap from a year before the Class 2 voluntary option applied (or if you weren’t self-employed that year), you’d buy Class 3 at a higher rate (£17.45/week = £907/year as of mid-2026).
The cost difference: Class 3 is roughly 5× Class 2. Always prefer Class 2 voluntary if eligible.
When to Voluntarily Top Up
Check your National Insurance record at gov.uk. You can buy back up to 6 years of voluntary contributions, but only certain years are eligible.
- If you’re missing several years and approaching State Pension age, the math usually favors buying back — but the savings depend on which years and your current entitlement
- Best to call HMRC’s State Pension forecast service before sending money — they’ll tell you whether buying a year will actually increase your eventual pension
Class 4 — How It’s Calculated
Class 4 is calculated on net self-employment profits (after allowable expenses but before personal income tax). It’s collected through Self Assessment.
For a sole trader with £40,000 profit in 2025–26:
- Class 4: 6% on (£40,000 − £12,570) = 6% × £27,430 = £1,646
- Income tax: depends on other income, but typically 20% on most of the band
- Total tax + NI on £40k profit: roughly £6,400–£7,400 depending on personal allowance use
The PAYE+Self-Employed Mix
If you have both employed and self-employed income:
- Class 1 NI on employment (deducted from payslip)
- Class 4 NI on self-employment (Self Assessment)
- Combined contributions count toward State Pension credits — you can’t be charged for more than 53 weeks in a year
For people with significant employment income, self-employment NI is usually a small additional bite.
Bottom Line
For 2026 self-employed in the UK: Class 2 has largely vanished as a mandatory payment, but voluntary Class 2 is the cheapest way to fill State Pension gaps. Class 4 at 6% above £12,570 is moderate. Always check your NI record before age 50 — gaps are cheap to fill at £179/year now, very expensive to ignore until State Pension age.