AND CLASS 2
AND CLASS 2
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GET TO KNOW
Once you set up as self-employed you will be responsible for paying your own income tax and National Insurance (NICs). You must register with HMRC within three months of starting trading, even if you already pay tax via self assessment and this can be done online or by calling HMRC.
Establishing your employment status
It is important to know your employment status because it affects how you pay tax and NICs. Use HMRC’s Employment Status Indicator tool at the outset to confirm your self-employed status.
Paying income tax and National Insurance Contributions
If you are self-employed you have to calculate your income tax and submit a self assessment tax return to HM Revenue & Customs.
In addition there are two types of National Insurance contribution you may have to pay. These are based on your profits and are collected at the same time as income tax.
Class 2 NICs - Unless your profits from self-employment are below the Small Profit Threshold of £6,025 for 2017/18 you will have to pay Class 2 NICs. For 2017-18, class 2 National Insurance is due at £2.85 per week.
Class 4 NICs - If your taxable profits are above the lower Class 4 profit limit (£8,164 for 2017-18) you will pay Class 4 contributions of 9% on profits over this limit. If profits are over £45,000 in 2017-18 then the rate of Class 4 National Insurance falls to 2% on profits over this higher limit.
Registered office: 61 Friar Gate, Derby, Derbyshire, DE1 1DJ
Adrian Mooy & Co is the trading name of Adrian Mooy & Co Ltd. Registered in England No. 05770414
Registered to carry out audit work by the Association of Chartered Certified Accountants - auditregister.org.uk 8011438
61 Friar Gate - Derby - DE1 1DJ