Do I have to pay National Insurance?
Yes. If you are self employed you are responsible for making sure you pay your own tax and National Insurance contributions.
The norm is to pay Class 2 National Insurance (NI) Contributions, which are paid at a flat weekly rate of £2.70 (2013/2014), although if your annual profit is over £7,755 you fall into the Class 4 National Insurance Contributions category as well. See below for more details on this.
Your National Insurance contributions go towards certain benefits, such as maternity leave and state pension, however they don’t count towards additional state pension, statutory sick pay or job seekers allowance. Therefore it is advisable to make your own arrangements for your income protection insurance and a personal pension.
If your profits (not your turnover – many people get confused about this) are over £7,755, then you’ll also be responsible for class 4 NI contributions. If your profits are between £7,755 and £41,450 (2013/2014) this is an additional 9%, and any profit over £41,450 there is an additional 2% to pay as well.
Your National Insurance contributions are calculated alongside your tax return and you pay them with your income tax. You will need to pay your Class 2 National Insurance contributions either monthly or bi-annually by Direct Debit to Her Majesty’s Revenue and Customs (HMRC).
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