National Insurance Contributions NIC

Entertainers banner

Class 1, 2 and 3 National Insurance Contribution (NIC)

Class 1

This is the NIC taken by your employer at source.

Class 2

This is the NIC paid on your self employed income. From the 6th April 2015 this is an annual charge to each 5th April which you declare in your annual self assessment Tax Return and is payable on the 31st January folloo9wing the end of that tax year (to 5th April). Please note that although some of your engagements may be outside of the UK you will still be liable to pay class 2 NIC on these earnings.

In order to avoid suffering European Union (EU) NICs on any earnings within the European Economic Area, you should apply for a form A1/E101 by going to the HMRC website (www.gov.uk) and type into the search box “form CA3837” and then complete and submit your application either by post, or online. If you do pay any EU NICs on your freelance earnings, please note that these contributions can count towards your basic UK retirement pension.

When you start self employment there is no need to advise the National Insurance Contributions Office (NICO) as, when you complete and submit form CWF1, HMRC will automatically pass on your information to NICO.

If your turnover from your freelancing also includes Class 1 sources, this proportion of your net profits will not be assessable when calculating your profits for both Class 2 and Class 4 NIC purposes.

Class 3

This is a voluntary NIC to top up any deficit in your NIC, e.g. for state pension self employed persons can claim to pay Class 3 NICs by ticking the box in their annual Tax Return.

Class 4

The amount of Class 4 NICs payable is based on the net taxable profit of your annual accounts (i.e. after capital allowances). Class 4 NICs will be payable as part of your self assessment Tax Return each year and form part of your total tax liability.

Click here to email Theresa Foreman for further information or if you would like to ask her a question.

This material provides only an overview of the regulations in force and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.