Class 2 National Insurance contributions

Who Pays Class 2 contributions

Class 2 National Insurance contributions are payable by self employed people, providing the residence and presence conditions are met which are, you

  • are normally resident in UK
    or
  • have resided in UK for 26 of the 52 weeks before the contribution week in question.

You must pay Class 2 contributions if you are self-employed and

  • age 16 or over and
  • below State Retirement Pension age
  • have not been excepted from liability to pay.

A self-employed person can be excepted from Class 2 National Insurance contributions liability if their net profit is expected to be less than the Small Earnings Exception (SEE) limit. Use this link to find the latest information on National Insurance contributions rates. SEE is not granted automatically, you must apply to:

HM Revenue & Customs
National Insurance Contributions Office
Self Employment Services
Benton Park View
Newcastle upon Tyne
NE98 1ZZ

by completing the application form CF10. SEE is normally awarded for three years at a time unless a shorter period is warranted, or where you are newly self employed.

You can also be exempted from Class 2 contributions for any contribution week you are:

  • in receipt of Sickness Benefit, Invalidity Benefit or Incapacity Benefit for the whole week
  • incapable of work for the whole week
  • undergoing imprisonment or detention in legal custody for the whole week
  • a Volunteer Development Worker for the whole week
  • in receipt of Maternity Allowance
  • in receipt of Invalid Care Allowance.

If you are a married woman or widow and you have opted to pay a reduced amount of National Insurance contributions you won’t have to pay Class 2 contributions, but you will have to pay Class 4 contributions if your profits are high.

What is the Class 2 rate?

Class 2 is a flat rate paid for every week you are self-employed, including holiday periods, regardless of how much you earn.

Liability for Class 2 National Insurance contributions is always calculated in complete weeks, which run seven days from midnight of Sunday to midnight of the following Saturday. This means if your self-employment starts on a Wednesday, your liability will be calculated from the previous Sunday.

How do I pay Class 2 National Insurance contributions?

Before you can pay Class 2 contributions you must be registered as being self employed with HM Revenue and Customs. You do this by completing form CWF1 (PDF 83K). You should also complete the Direct Debit form CA5601 (PDF 109K) and return this to us. It is important that you read the information’ How to register as self employed. You must tell the HM Revenue and Customs within 3 months of becoming liable to pay Class 2 contributions; otherwise you may incur a £100 penalty. If you do not register and are not paying tax, you will be breaking the law and could be liable to further penalties.

HM Revenue & Customs, National Insurance contributions Office collects Class 2 contributions by Direct Debit or by Quarterly Bill. This link will provide information on how to pay National Insurance contributions.

You may also be subject to a penalty fine if you fail to notify HM Revenue and Customs within 3 months of your self-employment commencing.

If you delay payment of your Class 2 contributions for more than one year from the end of the tax year in which the contributions are due you may have to pay at a higher rate and any late payments may effect your entitlement to benefit.

Can I defer my Class 2 National Insurance contributions

If you have substantial Class 1 liability, in addition to self-employed liabilities, you can apply for a deferment of your Class 2 and Class 4 liabilities. This will avoid paying contributions in excess of the maximum amount payable and thereby removes the need for you to apply for a refund.

Newly self-employed

If you are just starting up in business and want help in understanding any of this information, our Business Support Teams are available to provide face-to-face assistance. You can contact them online or by phoning the Newly Self Employed Helpline on 08459 154515.

Do Class 2 contributions count towards benefit

Class 2 National Insurance contributions give entitlement to a range of contributory benefits

For information about any of these benefits – you can contact your local DWP Office, or visit the DWP Internet site.

A list of Frequently Asked Questions is available should you require them.