Work out your take-home pay
Income tax, National Insurance and net pay for any UK salary, 2026-27.
Self-employed people pay Class 4 National Insurance at 6% on annual profits between £12,570 and £50,270, and at 2% on profits above £50,270, for the 2026-27 tax year [1]. The main rate stood at 9% until 6 April 2024, when two successive cuts brought it down to 6%, a change HMRC estimated would benefit more than 2 million people [5].
Class 4 is now the only National Insurance most sole traders and partners actually pay. Class 2 is treated as paid once profits reach the Small Profits Threshold of £7,105, so it protects the contribution record without a separate bill [1] [2]. Class 4, by contrast, is a straightforward charge on profits, collected alongside income tax through Self Assessment.
The charge looks simple, yet it generates recurring questions. Which profits count, what happens to losses, how partners are assessed, whether someone with a salaried job as well as a business pays twice, and when the charge stops at State Pension age all have specific answers in HMRC guidance.
This article sets out the rates and limits, works through the calculation at several profit levels, compares Class 4 with the Class 1 contributions paid on a salary, explains the exemptions and special cases, and covers how and when the charge is paid.
Key takeaways
- Class 4 is charged at 6% on profits between £12,570 and £50,270 and at 2% above £50,270 for the 2026-27 tax year [1] [2].
- Class 4 does not build entitlement to the State Pension; Class 2, treated as paid above £7,105 of profit, does that job [7].
- Someone over State Pension age at the start of the tax year pays no Class 4, but anyone reaching it during the year stays liable for the whole year [3].
- Class 4 cannot be deferred, even for people who also pay Class 1 on a salary [4].
- It is paid through Self Assessment, including payments on account on 31 January and 31 July [6].
What Class 4 National Insurance is
National Insurance comes in several classes. Employees and employers pay Class 1 through payroll, Class 3 is a voluntary contribution to fill gaps, and the self-employed have Class 2 and Class 4 [2]. Class 4 is the profit-related charge on self-employed income.
Who pays it
Class 4 applies to individuals who carry on a trade, profession or vocation, whether as a sole trader or as a partner. Each partner, including a member of a limited liability partnership, is liable on their own share of the partnership's profits rather than on the partnership's total [11]. A partnership with three partners therefore produces three separate Class 4 calculations, each with its own £12,570 Lower Profits Limit.
The obligation starts once a person registers as self-employed and makes profits above the Lower Profits Limit. HMRC requires anyone becoming self-employed, as a sole trader or in a partnership, to tell it [1].
What Class 4 does not do
Class 4 is a tax on profits rather than a contribution that earns benefits. It does not count towards the State Pension or contributory benefits [7]. Qualifying years for the self-employed come from Class 2, which is treated as paid when profits reach the Small Profits Threshold [1].
The guide to Class 2 National Insurance for the self-employed covers that side of the record in detail.
Class 4 rates and limits for 2026-27
The figures below come from HMRC's published rates and allowances for National Insurance contributions [2].
The current figures
| Item | 2025-26 | 2026-27 |
|---|---|---|
| Lower Profits Limit | £12,570 | £12,570 |
| Upper Profits Limit | £50,270 | £50,270 |
| Rate between the limits | 6% | 6% |
| Rate above the Upper Profits Limit | 2% | 2% |
| Small Profits Threshold (Class 2) | £6,845 | £7,105 |
| Class 2 voluntary rate | £3.50 a week | £3.65 a week |
The two Class 4 limits are aligned with the income tax Personal Allowance and the higher-rate threshold, which is why they have not moved between the two years [2]. Profits up to £12,570 attract no Class 4 at all [7].
How the rate fell from 9% to 6%
The Autumn Statement 2023 cut the main Class 4 rate from 9% to 8% from 6 April 2024, and the Spring Budget 2024 cut it again to 6% from the same date [5]. The government estimated that an average self-employed person with profits of £28,000 would save £310 a year [5].
| Period | Main Class 4 rate | Additional rate |
|---|---|---|
| Before 6 April 2024 | 9% | 2% |
| From 6 April 2024 | 6% | 2% |
The cost to the Exchequer of the Class 4 reduction is put at £735 million for the 2026-27 tax year alone [5].
How Class 4 is calculated
The calculation applies the two rates to slices of the year's profits. The challenge lies less in the arithmetic than in arriving at the right profit figure.
Which profits count
Class 4 starts from the trading profit computed for income tax, with a limited set of adjustments [9]. Certain trade-related interest and annual payments can be deducted if they have not already been taken into account, including interest on a partnership loan used wholly for the trade [9].
Several reliefs that reduce income tax do not reduce Class 4. Personal allowances, personal pension contributions and retirement annuity relief are all disallowed for Class 4 purposes [9]. A sole trader who pays £5,000 into a personal pension therefore saves income tax on that amount but pays Class 4 on the full profit.
Worked examples at five profit levels
The table applies the 2026-27 rates to a range of annual profits [1] [2].
| Annual profit | Profit taxed at 6% | Profit taxed at 2% | Class 4 due |
|---|---|---|---|
| £10,000 | £0 | £0 | £0 |
| £13,000 | £430 | £0 | £25.80 |
| £30,000 | £17,430 | £0 | £1,045.80 |
| £55,000 | £37,700 | £4,730 | £2,356.60 |
| £80,000 | £37,700 | £29,730 | £2,856.60 |
The £13,000 and £55,000 figures match the worked examples published by the Low Incomes Tax Reform Group for the same tax year [7]. At £55,000, the 6% band is full at £2,262 (£37,700 x 6%), and the 2% band adds £94.60 on the £4,730 above £50,270.
The maximum charge at the main rate is therefore £2,262 a year. Above £50,270, every additional £1,000 of profit adds only £20 of Class 4, which is one reason the effective rate falls as profits rise. The wider picture, including income tax, is set out in the guide to how much tax a self-employed person pays.
Losses
Trading losses are relieved for Class 4 in the same way as for income tax, including set-off against general income, early-year loss relief, carry-forward against the same trade and terminal loss relief [8]. The difference arises when a loss is set against income that is not liable to Class 4, such as a salary already subject to Class 1.
In that case, the loss is not used up for Class 4. The unused amount is carried forward against future Class 4 profits, so the income tax and Class 4 loss balances can diverge [8]. Losses arising from interest payment relief are excluded entirely from Class 4 relief [8].
Class 4 compared with Class 1 on a salary
The gap between self-employed and employed National Insurance is one of the largest structural differences in the UK tax system. Employees pay Class 1 at 8% between £12,570 and £50,270, and employers add 15% on earnings above £5,000 [2] [12].
The same income under each regime
The comparison below uses an income of £30,000 for the 2026-27 tax year, with the employer's contribution shown separately because it is paid on top of the salary [2] [12].
| Basis | Contribution | Annual amount |
|---|---|---|
| Self-employed, Class 4 | (£30,000 - £12,570) x 6% | £1,045.80 |
| Employee, Class 1 primary | (£30,000 - £12,570) x 8% | £1,394.40 |
| Employer, Class 1 secondary | (£30,000 - £5,000) x 15% | £3,750.00 |
The self-employed worker pays £348.60 less than the employee on the same income, and no employer contribution arises at all. This difference sits behind much of the scrutiny of off-payroll working and employment status, because the National Insurance cost of engaging someone as an employee is several times that of engaging a genuinely self-employed contractor.
The effect on a sole trader who takes on staff
A sole trader who hires employees moves into both regimes at once. The owner continues to pay Class 4 on business profits through Self Assessment, while the business deducts Class 1 from employees' pay and pays employer Class 1 through PAYE [1] [12]. Employer National Insurance and employees' wages are deductible business expenses, so they reduce the profit on which the owner's Class 4 is calculated [9].
Running that payroll requires an employer PAYE scheme, Real Time Information submissions and payslips. Sole-trader payroll built on HMRC-recognised software handles the Full Payment Submission automatically, and the guide to sole traders employing staff covers the registration steps.
Exemptions and special cases
Most people with profits above £12,570 pay Class 4, but HMRC guidance sets out a short list of exceptions and special treatments.
Age-related exemptions
People under 16 at the beginning of the tax year and people over State Pension age at the beginning of the tax year are exempt [3]. The test is applied at the start of the year, which produces an important consequence for older traders.
| Situation at 6 April | Class 4 for that tax year |
|---|---|
| Under 16 | Exempt |
| Below State Pension age, reaches it during the year | Liable for the whole year |
| Already over State Pension age | Exempt |
Someone who reaches State Pension age in, say, October remains liable for Class 4 on the full year's profits and stops paying only from the following tax year [3] [7]. Class 2, by contrast, is treated as paid only up to the week State Pension age is reached [7].
Other groups outside the normal rules
Profits received by trustees, executors or administrators in that capacity are exempt from Class 4 [3]. Ministers of religion who receive no salary or stipend, and people who make investments without doing so as a business and without a fee or commission, do not pay self-employed National Insurance [1].
Examiners, moderators, invigilators and people who set exam questions pay a variant known as Special Class 4. They cannot use Self Assessment for it and must contact the National Insurance office instead [1].
Employed and self-employed at the same time
Many people run a business alongside a salaried job. They pay Class 1 through the employer's payroll and Class 4 on business profits, and the two interact through an annual maximum.
The annual maximum
Where a person has already paid the maximum Class 1 for the year, Class 4 may be limited to 2% on profits above £12,570 [7]. The adjustment is calculated automatically when the Self Assessment return is filed on time [7]. A senior employee earning well above the Upper Earnings Limit who also has consultancy profits therefore pays far less Class 4 than a full-time sole trader with the same profit.
Why Class 4 cannot be deferred
Employees with more than one job can apply to defer Class 1 using form CA72A, so that secondary jobs deduct only 2% [4]. For the 2026-27 tax year, HMRC must receive that application by 14 February 2027 [4].
No equivalent route exists for the self-employed. HMRC states that Class 4 contributions cannot be deferred, although anyone who overpaid in earlier tax years may be able to claim a refund [4]. The annual maximum, applied through the tax return, is the only mechanism that limits a combined liability.
How and when Class 4 is paid
Class 4 has no payroll mechanism. It is calculated on the Self Assessment return and paid together with income tax [1].
Self Assessment deadlines
The balancing payment for a tax year is due by midnight on 31 January following the end of that year. Payments on account, each 50% of the previous year's bill, are due on 31 January and 31 July and include Class 4 [6].
| Payment for profits of the 2026-27 tax year | Due date |
|---|---|
| First payment on account | 31 January 2027 |
| Second payment on account | 31 July 2027 |
| Balancing payment | 31 January 2028 |
Payments on account are not required where the previous Self Assessment bill was under £1,000, or where more than 80% of the previous year's tax was paid at source [6]. A trader who expects lower profits can ask HMRC to reduce the payments online or with form SA303 [6]. The full filing process is covered in the guide to the self-employed tax return.
Making Tax Digital
The way profits are reported is changing. Sole traders and landlords with qualifying income over £50,000 in the 2024-25 tax year had to start using Making Tax Digital for Income Tax from 6 April 2026 [10]. The threshold falls to £30,000 from 6 April 2027 and to £20,000 from 6 April 2028, while partnerships will join on a timetable not yet set [10].
Making Tax Digital does not change the Class 4 rates or the payment dates, but quarterly updates give an earlier view of the profit figure on which Class 4 will be charged. Accountants handling both client payrolls and Self Assessment often consolidate that work in a multi-client payroll dashboard.
Choosing between self-employment and a company
Class 4 is one of the variables in the decision to trade through a limited company. A director is an employee of the company and is paid through PAYE, so a director's salary attracts Class 1 rather than Class 4 [12]. Dividends paid from company profits attract no National Insurance of any class, although they carry their own income tax rates.
The comparison involves corporation tax, dividend tax, employer National Insurance and administration costs, and the outcome depends heavily on profit levels. The guide to sole trader versus limited company works through the numbers.
Compare the cost of employment
For a sole trader weighing up a first hire, or a contractor comparing a salaried offer with self-employment, the Moonworkers UK salary calculator applies the 2026-27 PAYE and Class 1 National Insurance rules to any gross salary, making the comparison with Class 4 straightforward to model.
£ per month
e.g. 1257L, S1257L, BR, D0
S = Scotland · C = Wales · W1/M1 = non-cumulative
Enter a salary or hourly rate above
About this calculator
This calculator gives you a close estimate of your UK payroll deductions for 2026-27, using HMRC's exact percentage method with periodised thresholds. It handles the three tax territories, K codes with the 50% regulatory limit and its carry-forward, weeks 53, 54 and 56, the cumulative and W1/M1/X bases, student and postgraduate loans, and pension contributions on qualifying earnings. It still won't match your payslip to the penny in every case: it does not cover in-year tax code changes, payrolled benefits in kind, NI deferral across more than one employment, directors on the annual earnings period, or employer-level annual adjustments such as the Employment Allowance and the apprenticeship levy. Powered by the same engine as the Moonworkers Payroll API.
Frequently asked questions
Why might the result differ from my payslip?
This calculator uses your current gross pay and tax code to produce an estimate. K-code carry-forwards and weeks 53, 54 and 56 are handled, and the Year-to-date section reproduces a specific period exactly. What your employer may apply that this does not: a mid-year tax code change, benefits in kind processed through payroll, or NI deferral across more than one employment. For most employees on a standard tax code the difference is negligible.
What tax code should I enter?
Use the tax code shown on your most recent payslip or the PAYE Coding Notice (P2) from HMRC. If you're not sure, 1257L is the standard code for most employees resident in England, Wales, or Northern Ireland. Use S1257L for Scotland or C1257L for Wales if you pay Scottish or Welsh income tax.
Which NI category applies to me?
Most employees use Category A. Use M if you are under 21, H if you are an apprentice under 25, or C if you are over State Pension age. Your employer is responsible for assigning the correct category — if in doubt, check your payslip.
Which student loan plan am I on?
Your plan depends on when and where you studied. Plan 1 covers students who started before September 2012. Plan 2 is for English and Welsh students who started from September 2012 to July 2023. Plan 5 applies to English students who started from August 2023. Plan 4 covers Scottish students. You can check your plan at gov.uk or on your payslip.
What is the YTD cumulative PAYE mode?
HMRC's standard method calculates income tax on your total earnings to date each period, then subtracts tax already paid. If you're mid-year and want to see exactly what tax should be deducted in a specific period, expand the Year-to-date section and enter your running totals from previous periods only.
Conclusion
Class 4 has become the centrepiece of self-employed National Insurance. With Class 2 treated as paid for anyone above £7,105 of profit, most sole traders and partners now see a single profit-based charge at 6% and 2%, collected through Self Assessment. The rate cut to 6% widened the gap with employment, where the combined employee and employer burden on the same income is several times higher.
The details still matter. Pension contributions do not reduce Class 4, losses set against a salary carry forward separately, the State Pension age exemption only begins at the start of the next tax year, and Class 4 cannot be deferred. As Making Tax Digital extends to more traders from 6 April 2027 and 6 April 2028, the profit figure behind the charge will be visible earlier in the year, giving the self-employed and their advisers more time to plan for it.
Frequently asked questions
How much is Class 4 National Insurance on £30,000 profit?
For the 2026-27 tax year, Class 4 on £30,000 of profit is £1,045.80. The first £12,570 is free of Class 4, and the remaining £17,430 is charged at 6%. Class 2 is treated as paid because the profit is above the £7,105 Small Profits Threshold, so no further self-employed National Insurance is due.
Does Class 4 National Insurance count towards the State Pension?
No. Class 4 is a charge on profits and does not build entitlement to the State Pension or contributory benefits. Self-employed qualifying years come from Class 2, which is treated as paid when profits reach the Small Profits Threshold, or from voluntary Class 2 payments where profits are lower.
Do partners in a partnership pay Class 4 on the whole partnership profit?
No. Each partner, including each member of a limited liability partnership, pays Class 4 on their own share of the profits. Every partner therefore benefits from their own £12,570 Lower Profits Limit and their own £50,270 Upper Profits Limit.
Is Class 4 National Insurance payable after State Pension age?
Class 4 stops only from the start of the tax year after State Pension age is reached. A self-employed person who reaches State Pension age part-way through a tax year remains liable for Class 4 on the whole of that year's profits. From the following 6 April, no Class 4 is due.
