As a sole trader, you are liable to pay two classes of NICs.
- Class 2 NICs are paid at a set rate. For the 2020 – 2021 tax year, this rate is £3.05 per week. HMRC usually calculates and collects your Class 2 NICs as part of your self assessment return. If you earn less than the 'Small profits threshold' then you do not have to pay Class 2 NICs, although you may choose to.
- For the tax year 2020 – 2021 the Small profits threshold is £6,475 per year.
- If you do not pay Class 2 NICs, you may not be entitled to certain contribution-based benefits. Your State Pension may also be reduced.
- If you earn above £9,500 per year, Class 4 NICs are payable as well as Class 2 NICs. Class 4 NICs are calculated as a percentage of your profitable earnings along with your income tax.
How much you pay ?
| Class | Rate for tax year 2020 to 2021 |
|---|
| Class 2 | £3.05 a week |
| Class 4 | 9% on profits between £9,501 and £50,000
2% on profits over £50,000 |