National Insurance (NI)
If you are self-employed as a sole trader or a partner, you pay two types of National Insurance (NI):
- Class 2 National Insurance that is fixed at £2.85 per week.
- Class 4 National Insurance on your taxable profits at 9% of the profits between £8,164 and £45,000 Plus, 2% of any profits over £45,000.
If you are an employee, and that’s you if you’re a Director of your own Limited Company, there are three types of National Insurance to worry you. The most common rates, unless you are contracted out of the state pension scheme are.
- Employees Class 1 National Insurance (paid by you)– First £8,164 per year – nothing Next £36,868 – 12% Everything above 45,032 – 2%
- Employer’s Class 1 National Insurance (paid by your company)– First £8,164 per year – nothing Everything above that – 13.8%
There are exemptions for startup businesses in some parts of the country for 12 months for up to 10 employees, capped at £5,000 per employee (for earnings paid up to 5 September 2013).
Class 1A National Insurance (paid by your company)– Paid on the value of benefits provided by your company – 13.8%