How much National Insurance do self-employed people pay?

Budget 2021: Rishi Sunak outlines support for self-employed

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Along with running their own businesses, self-employed people are also responsible for paying their tax and National Insurance as well. How much National Insurance and income tax someone who is self-employed needs to pay will differ depending on how much profit they make.

How much National Insurance do self-employed people pay?

There are two types of National Insurance that people who are self-employed have to pay.

Profits are calculated by deducting expenses from self-employment income.

Class 2 National Insurance is paid if your profits are £6,515 or more a year.

Class 4 National Insurance is paid if your profits are £9,569 or more a year.

The rates for 2021 to 2022 are as follows:

  • Class 2 – £3.05 a week
  • Class 4 – 9 percent on profits between £9,569 and £50,270
  • – 2 percent on profits over £50,270

For most self-employed people, National Insurance is paid through Self Assessment and self-employed people are required to file tax returns.

Some choose to send their Self Assessment tax returns via paper form, but many opt to file their tax returns online now via the Government website.

How much income tax do self-employed people pay?

Self-employed people are required to pay the same percentage of income tax on their profits as employed people.

For 2021/2022, the Personal Allowance is up to £12,570 and the tax rate is zero percent.

The remaining income tax rates are as follows:

  • Basic rate – £12,571 to £50,270 – 20 percent
  • Higher rate – £50,271 to £150,000 – 40 percent
  • Additional rate – over £150,000 – 45 percent

The Personal Allowance is smaller for people whose income is above £100,000.

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What support is available for people during the lockdown?

The Government’s Self-Employment Income Support Scheme (SEISS) will continue to provide financial support to eligible claimants until September 2021.

The fourth SEISS grant is still open for applications, but people need to apply on or before June 1, 2021.

The grant will cover the three-month period of February to April 2021 and will be worth 80 percent of three month’s average monthly trading profits, capped at £7,500 in total.

To get the fourth SEISS grant, claimants need to meet the eligibility criteria, which includes having traded in both 2019/2020 and 2020/2021 tax years.

Claimants also need to have submitted their tax return on or before March 2, 2021 for the 2019/2020 tax year.

Claimants should also have evidence they “reasonably believe” there will be a “significant reduction” in their trading profits, while also declaring that they “intend to continue to trade”.

Further details on eligibility for SEISS can be found on the Government website HERE.

The fifth and final SEISS grant will cover May to September 2021, but it will only be worth a percentage of three month’s average monthly trading profits.

The percentage offered in the fifth grant will differ depending on how much an individual claimant’s turnover has decreased.

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