What is the Class 4 National Insurance rate for 2024/2025 and 2025/2026?

Following the Spring 2024 cuts, Class 4 National Insurance was reduced from 9% down to 6% on self-employed profits between £12,570 and £50,270. Profits over £50,270 are taxed at 2%.

Do I still have to pay Class 2 National Insurance?

From 6 April 2024, compulsory Class 2 National Insurance was abolished. If your self-employed profits are at or above the Small Profits Threshold (£6,725), you are treated as having paid Class 2 NI for free, preserving your entitlement to the State Pension and contributory benefits without paying anything.

What are HMRC Payments on Account and when are they due?

Payments on account are advance payments towards your next year's tax bill. They are triggered if your self-assessment tax and Class 4 NI bill exceeds £1,000 (and less than 80% was collected at source). You make two equal payments of 50% of your previous year's tax bill: the first on 31 January and the second on 31 July.

Should I use the £1,000 Trading Allowance or claim actual expenses?

If your total business expenses are less than £1,000 in a tax year, you can claim the £1,000 flat Trading Allowance instead of tracking actual receipts. If your allowable expenses exceed £1,000, you should claim actual expenses to maximize your tax deductions.

Class 4 NI: 6% Live Class 2 £0 Credits 100% Private (Client-Side)

UK Self-Employed & Sole Trader Tax Calculator

Calculate your exact Self-Assessment tax bill for 2024/2025 and 2025/2026. Models the reduced 6% Class 4 NI rate, £0 Class 2 National Insurance credits, the £1,000 Trading Allowance, HMRC Payments on Account timetable, and a side-by-side comparison against a Limited Company.

Quick Scenarios:

Turnover & Business Expenses

Tax Year 2024/25 & 25/26

Gross Self-Employed Revenue / Turnover £55,000

£5k £50k (Higher rate) £100k (Taper) £150k+

Expense Deduction Method

Equipment, software, phone, home office, travel, accountancy

Net Taxable Trading Profit: £47,000

Tax Code & Deductions

Statutory Deductions

Country / Tax Region

Student Loan Repayment Plan

Other Taxable Income (PAYE salary, rental, pension) £0

Uses up personal allowance and pushes profits into higher tax bands

Sole Trader vs Limited Company Comparison

At your current profit level, here is how operating as a Sole Trader compares to incorporating as a UK Limited Company (taking optimal salary + dividends):

Structure	Total Tax & NI	Net Take-Home	Take-Home %
Sole Trader (Current)	£8,952	£38,048	80.9%
Limited Company (SPV/Director)	£9,842	£37,158	79.1%

Annual Net Earnings

Take-Home Profit

19.0% Effective Tax

£38,048

Monthly: £3,171

•

Total Tax Bill: £8,952

Income Tax: £6,886

Class 4 National Insurance (6%): £2,066

Class 2 NI (Credits treated as paid): £0.00 (Exempt)

Total Self-Assessment Due: £8,952

Payments on Account Timetable 🗓️ HMRC Deadlines

31 January (Balancing + 50% Adv): £13,428

31 July (50% 2nd Advance Payment): £4,476

Applies when tax exceeds £1,000. Each advance payment is 50% of the previous year's tax.

Frequently Asked Questions

Clear answers regarding UK Self-Assessment, Class 4 NI cuts, and sole trader tax planning.

How much did Class 4 National Insurance decrease for 2024/2025? ▼

Class 4 National Insurance was cut from 9% down to 6% on self-employed trading profits between £12,570 and £50,270. This represents a direct tax saving of up to £1,131 per year for full-time sole traders. Profits over £50,270 remain taxed at 2%.

What is the difference between Class 2 and Class 4 National Insurance? ▼

Class 2 was historically a flat weekly fee (£3.45/wk) that provided access to the State Pension and contributory benefits. As of April 2024, anyone earning above £6,725 receives these National Insurance credits completely free of charge. Class 4 is a profit-based tax (6% / 2%) that goes to the general Treasury without directly affecting benefit entitlement.

Why is my first January tax bill so high? (The Payments on Account shock) ▼

In your first year where tax exceeds £1,000, HMRC requires you to pay 100% of your current tax bill PLUS a 50% advance payment towards next year's tax on 31 January. This means you must pay 150% of your annual tax bill in a single payment, followed by the remaining 50% on 31 July.

When should I incorporate as a Limited Company? ▼

With Corporation Tax at 19% to 25% and dividend tax at 8.75%/33.75%, the financial crossover point typically lies around £40,000 to £50,000 of profit. Incorporating becomes especially advantageous if you do not need to withdraw all profits for living costs, allowing you to retain cash inside the company for business investment or pension contributions.