National Insurance: self-employed and employees compared

If you are weighing up whether to work for yourself, the National Insurance question usually comes first, and the short answer is that the self-employed pay a lower main rate. Employees pay 8% on earnings between £12,570 and £50,270, while the self-employed pay 6% on profits in the same band. Above £50,270 both pay 2%¹.

That headline gap is real, but it is not the whole comparison. The two groups pay different classes of National Insurance, worked out on different things, over different periods, and they stop at different moments. Employees also have an employer paying contributions on their behalf and are usually enrolled into a workplace pension, neither of which happens automatically when you work for yourself.

This page sets out what each side pays, on what, when it starts and stops, what happens if you do both at once, and what still counts towards your State Pension when your earnings are low.

Employees pay 8%, the self-employed pay 6%

The rate difference is the part most people arrive knowing, and it is worth being precise about what it applies to. The 8% employee rate and the 6% self-employed rate both apply to income between £12,570 and £50,270. Above £50,270 the rate drops to 2% for both groups, so the advantage of being self-employed is worth most to someone earning in the middle of that band and disappears entirely at the top¹.

The gap has narrowed over time. The Resolution Foundation has described the remaining difference as a gap in personal National Insurance rates of 6% for the self-employed against 8% for employees, and has argued that a small rise in what the self-employed pay is not the real issue in how the tax system treats them⁴.

What the rate alone does not show is the employer contribution. An employer pays National Insurance on what it pays an employee, and that cost sits outside the employee's own deduction. A self-employed person has no equivalent, so the comparison between the two headline rates is not the same as a comparison of total cost. From April 2029 employers will face a higher National Insurance rate of 15% on contributions above a cap, which widens that side of the gap further⁶.

There is also the pension. Eligible employees are automatically enrolled into a workplace pension by their employer, with both sides contributing. Self-employed people are not automatically enrolled, and the proportion saving into a pension is far lower: 16% of self-employed workers compared with 88% of workers eligible for automatic enrolment⁷. The Parliamentary Work and Pensions Committee has recommended trials of default saving for self-employed people and a consultation on increasing the National Insurance they pay, with the increase paid into a pension if the self-employed person also contributes 5% of their earnings⁸.

When you start paying: £242 a week or £12,570 a year

National Insurance becomes mandatory at 16 or over, but only once earnings or profits pass a threshold, and the two thresholds are expressed differently¹.

An employee starts paying when they earn more than £242 a week from one job. A self-employed person starts paying when their profits are more than £12,570 a year¹. The monthly equivalent for employees is £1,048².

The self-employed figure is a profit test, not a turnover test. Profit means takings after allowable expenses, and benefits for self-employed people are worked out on net profit on the same basis⁹. Someone with substantial turnover and modest profit may therefore pay nothing, while someone with a smaller turnover and few expenses may cross the threshold.

Class 2 contributions are paid for each week in which you are both self-employed and have relevant profits at or above the small profits threshold¹⁰. Since the 2024 regulations, self-employed earners with profits at or above that threshold are treated as having actually paid Class 2 contributions, with the liability to pay them removed¹⁰.

Low earners who still build a National Insurance record

Falling below the threshold does not necessarily mean the year is lost. An employee earning from £129 to £242 a week from one job does not pay National Insurance, but their contributions are treated as having been paid to protect their National Insurance record¹. The lower earnings limit is £129 a week, and income between £129 and £242 is treated as if contributions had been made¹¹.

For the self-employed, the equivalent band is profits of £7,105 or more a year: no contributions are due, but the year can still count towards benefits and the State Pension¹. One independent guide puts the self-employed threshold at £6,515 or more a year, and the two figures do not agree¹².

A qualifying year is one in which you worked and paid National Insurance, received National Insurance Credits, or paid voluntary contributions¹³. Credits are available in various circumstances, including to people receiving or who have received Jobseeker's Allowance, who can receive credits towards the basic State Pension¹⁴.

Where a year is missing, voluntary contributions can fill it. Class 2 voluntary contributions for 2025-26 cost £3.50 a week, or £182 a year, and Class 3 voluntary contributions are £18.40 a week for the 2026 to 2027 tax year¹⁵. Before paying, it is worth checking whether the gap would actually increase your pension: the Future Pension Centre will check whether you have a gap and tell you whether paying would benefit you¹⁷.

How each is worked out: per pay period or per year

The mechanics differ more than the rates do, and this is where the two systems feel most different in practice.

An employee's National Insurance is worked out by the employer, taken from wages before they are paid, and sent to HMRC, the system known as PAYE¹⁸. It is assessed pay period by pay period, so a bonus month or a quiet month affects that period rather than being smoothed across the year. As an illustration of how the arithmetic works, on weekly earnings of £1,000 in the 2026 to 2027 tax year, the employee National Insurance due for that week is £58.66².

A self-employed person works it out annually through Self Assessment, reporting self-employment income on the short or full self-employment pages of the return¹⁹. Self Assessment software can pull in National Insurance details for the self-employed²⁰. Because the assessment is annual, a self-employed person whose income varies sees the whole year averaged, which is a different experience from an employee whose deductions move month to month.

Working for more than one employer or alongside self-employment

Doing both at once is common, particularly in the first year of self-employment, and it means paying both classes. Someone who is both employed and self-employed pays Class 1 National Insurance on their employed income and Class 2 or Class 4 on their self-employed income²¹.

The two are not netted off against each other. Each employment is treated separately for automatic enrolment purposes: where a jobholder has more than one employer, the rules apply separately in relation to each employment²². That means the £242 a week threshold is tested against one job, not against total earnings, so two part-time jobs each paying below it can leave a person paying nothing on either even though the combined income is well above the threshold.

For the self-employed side, a National Insurance number is needed to start, and the same number covers both strands of income²³. Being in partnership means being self-employed jointly with one or more other individuals, sharing work and responsibilities, and the National Insurance position follows from that status rather than from the partnership's own arrangements²⁴.

Stopping at State Pension age: the timing differs

Both groups stop paying eventually, but not at the same moment, and the difference catches people out.

An employee stops paying Class 1 National Insurance when they reach State Pension age¹. A self-employed person stops paying Class 4 National Insurance from 6 April, the start of the tax year, after they reach State Pension age¹. Someone who reaches State Pension age partway through a tax year therefore keeps paying Class 4 contributions until the following April, while an employee in the same position stops straight away.

State Pension age itself is not a single number. It can be between 61 and 68 depending on when someone was born and whether they are male or female²⁵. It is currently 66, increasing gradually over the next two years until it reaches 67²⁶. For someone born between 6 April 1977 and 5 April 1978, the claim age is between 67 and 68, on a set date depending on date of birth²⁷.

Working past State Pension age changes other things too. You do not pay National Insurance if you work past State Pension age²⁵. If you have reached State Pension age but are under 75 and earn more than £10,000 a year, your employer will not automatically enrol you into their workplace pension, but you have the right to join if you want, with both sides contributing and possible tax relief²⁹. Automatic enrolment generally applies to employees aged between 22 and State Pension age who earn at least £10,000 a year and work in the UK under a contract of employment³⁰.

Is National Insurance a tax?

Yes. National Insurance is a tax on your earnings, collected under its own rules and with its own thresholds rather than as part of income tax²¹. The distinction matters because the two are calculated separately, have different thresholds, and are treated differently in a range of situations.

One of those situations is termination payments. Employer contributions to a registered pension scheme, legal costs paid directly to your solicitor, and payments because of injury, illness or disability preventing you doing your job are not subject to tax and National Insurance³¹.

Another is pension income. National Insurance only applies to income from employment, not from pensions, so drawing a pension does not attract it at any age³². Pension contributions are treated differently again: employers do not pay National Insurance on pension contributions, but employees and self-employed people do³³.

What rate applies to earnings above £50,270?

Two per cent, for both employees and the self-employed². The 8% and 6% rates apply only between £12,570 and £50,270, and everything above that upper figure is charged at the lower rate regardless of how the income arises¹.

The practical effect is that the self-employed rate advantage is concentrated in the middle of the income range. Someone earning £30,000 pays less as a self-employed person than as an employee; someone earning £80,000 pays the same rate on the portion above £50,270 either way, and the saving is limited to the band below it.

Will salary sacrifice pension contributions still save National Insurance?

For the moment, salary sacrifice can reduce National Insurance for both sides. In some cases it means you and your employer pay less tax and National Insurance³⁴.

That changes from April 2029. From then, the amount exempt from National Insurance contributions will be capped at £2,000 a year³⁵. Contributions above the cap will be subject to employer and employee National Insurance, while income tax relief is unaffected³⁶. The reform removes the excluded exemption for employer pension contributions for Class 1 National Insurance where salary sacrifice exceeds the annual £2,000 cap³⁶.

The government has estimated the average additional employee National Insurance contributions liability at £84 in the first year of impact, for employees with salary sacrifice contributions in excess of the contribution limit, in the 2029 to 2030 tax year³⁶.

Can I get a refund if my earnings fall later in the year?

It is possible, and the mechanism exists precisely because the two systems measure income over different periods. If your income varies or falls during the tax year, your total for the year can end up below the repayment threshold even though your earnings exceeded the weekly or monthly threshold at the time³⁷.

The route is the National Insurance contribution refund service. You can apply if HMRC has written to you about overpaid National Insurance contributions or contributions paid in error by your employer, and only if you have received a letter from HMRC telling you that you may be due a refund³⁸. Personal representatives and employers cannot use the service; personal representatives must follow the instructions in their own letter³⁸.

Working in the UK from abroad or overseas

Where you pay depends on where you work and for whom, not simply on where you live.

If you work abroad for a foreign employer you will not normally pay National Insurance in the UK, but you may have to pay foreign contributions. If you normally live in the UK and work abroad for a UK employer, you are required to pay National Insurance while you are abroad³⁹. Some people employed abroad have to pay UK National Insurance contributions⁴⁰.

Class 1 contributions can apply to employment abroad where your employer has a place of business in the UK, you are ordinarily resident in the UK, you were resident in the UK immediately before starting the employment abroad, and you are not covered by any social security agreement between the UK and other countries¹⁰.

Coming the other way, you will usually pay National Insurance if you work in the UK⁴¹. You do not need to pay it or get a number if you hold a certificate or document proving you pay social security contributions in the EU, Iceland, Liechtenstein, Norway or Switzerland, or a certificate from a country with a social security agreement with the UK⁴¹. If you are sent by an employer in your home country to work in the UK temporarily, from a country outside those arrangements, you usually will not need to pay National Insurance for the first 52 weeks you are in the UK⁴¹.

If you live abroad and are employed in the UK, your tax is calculated automatically on the days you work in the UK⁴². Paying National Insurance while abroad protects your State Pension and entitlement to other benefits and allowances⁴³. If you did not pay it while you were abroad, you can check your National Insurance record to see how your State Pension might be affected⁴¹. Access to voluntary National Insurance contributions for individuals living or working abroad is being restricted from 6 April 2026.

Students are in a similar position: if you are a student with a job you pay Income Tax and National Insurance if you earn over a certain amount, and foreign students working in the UK normally pay UK tax and National Insurance on the same basis³⁹.

How can I check my National Insurance record for the State Pension?

The new State Pension is usually based on your own National Insurance record. The amount you get depends on that record and on when you reach State Pension age. Each qualifying year after 6 April 2016 added to your record increases your State Pension amount, and the full new State Pension is £241.30 a week³.

You can check your record through the check your National Insurance record service on GOV.UK, which shows missing or incomplete qualifying years and how much they would cost to fill¹⁵. A State Pension forecast gives an estimate of what your National Insurance record could be when you reach State Pension age.

If you have been both employed and self-employed and think you may have a gap, you can contact the Future Pension Centre, which will check whether you have a gap and tell you whether it would benefit you to make a payment¹⁷. One limit to be aware of: if you reach State Pension age on or after 6 April 2016, you cannot increase your State Pension using your spouse's or civil partner's National Insurance record¹⁰.