What is National Insurance?
National Insurance is money paid to HMRC by employees, employers, and the self-employed in return for certain state benefits.
Example: How Joel pays Class 2 National Insurance contributions
Joel is a freelance tree surgeon. He needs to know three things to work out how much Class 2 National Insurance he needs to pay.
- His taxable profit: £20,454
- The Small Earnings Threshold: £6,475
- The Class 2 National Insurance rate: £3.05 per week
For the tax year 2020/21 Joel’s taxable income exceeds the Small Earnings Threshold, which means he is due to pay Class 2 contributions.
At £3.05 per week, for the year Joel will pay:
52 x £3.05 = £158.60 in Class 2 National Insurance contributions
These contributions will be calculated annually as part of Joel’s Self Assessment Tax return.
How to pay Class 2 National Insurance contributions
|Online or telephone banking (Faster Payments)||Same or next day|
|CHAPS||Same or next day|
|Bacs||Three working days|
|Debit card online||Same or next day|
|Business credit card (1.5% charge, personal credit cards are no longer accepted)||Three working days|
|Direct Debit||Three working days|
|Standing order||Three working days|
|At your bank or building society||Three working days|
Note: Class 2 National Insurance contributions are calculated annually as part your Self Assessment tax return. The total amount of contributions due will be included in the overall bill. This is sent to you following completion of your return and includes any Income Tax you owe.
Online or telephone banking: If you’re paying by online or telephone banking (Faster Payments, CHAPS or Bacs) details for the HMRC bank account you should pay your tax bill into can be found here.
Debit card or business credit card: If you are paying by debit or credit card you can do so by following the links from your HMRC online account.
Direct Debit: You can set up a Direct Debit from your HMRC online account. The first time you set up a Direct Debit for Self Assessment allow at least five working days the before you submit your return to ensure the payment is taken from your account in time. Thereafter allow for at least three days. Note that you have to set up a new direct debit every time you wish to make a payment and that payment on account requires a separate Direct Debit.
At your bank or building society: You can only pay your Income Tax bill at your bank or building society if you still get paper statements from HMRC and have the paying-in slip they sent to you in the post. Payments can be made by cash or cheque made payable to ‘HM Revenue and Customs only’ followed by your Unique Taxpayer Reference (UTR) followed by the letter ‘K’.
Previous Class 2 National Insurance rates