Although not technically a tax allowance, we thought it was worth covering what the rate of National Insurance contributions are for self-employed people for the tax year 2019/20.
Self-employed NI rates have been a bit confusing in the past few years as changes were proposed to scrap Class 2 NI and subject people only to Class 4 NI – however, these changes have been scrapped (for the present) so the two tier approach still applies.
If you are self-employed then the rate of National Insurance that you pay depends on your profits for the tax year. There are effectively 4 different tranches that trigger different rates of NI.
Profits of less than £6,365 for 2019/20
If your profits are less than £6,365 then you do not need to pay any National Insurance contributions. However, you may think it worthwhile to pay voluntary Class 2 contributions if you are not already covered for these in any other capacity as this may increase or entitle you to certain benefits including additional state pension or Maternity Allowance.
Profits between £6,365 and £8,632 for 2019/20
If your profits are between £6,365 and £8,632 then you only have to pay Class 2 NI contributions which are at a flat rate and not based on the amount of profits. Most people pay these through the self-assessment tax return.
For 2019/20 Class 2 NI contributions are £3 a week – so £156 for the year.
Profits on or over £8,632 for 2019/20
If your profits are £8,632 or above then you will also need to pay Class 4 NI as well as Class 2 NI payments. Class 4 NI is charged at 9% of profits between £8,632 and £50,000.
Profits over £50,000 for 2019/20
If your profits from your self-employed business are over £50,000 then you will need to pay Class 2 NI of £3 a week, plus Class 4 NI for the earnings between £8,632 and £50,000, plus 2% on earnings over £50,000.