Since April 2024, the landscape of National Insurance for self-employed people has changed fundamentally. Class 2 NIC — the flat weekly charge that sole traders paid for decades — was abolished for most self-employed people. Class 4 NIC remains and was reformed at the same time.
If you last looked at self-employment NIC rules before April 2024, almost everything you read is now out of date. This guide covers the current position in 2026 — what exists, what was abolished, what voluntary contributions look like, and how NIC interacts with your side hustle income if you also have a PAYE job.
What Class 2 NIC Was (and Why It Was Abolished)?
Class 2 NIC was a flat weekly contribution paid by self-employed people on profits above the small profits threshold. In 2023/24, the rate was £3.45 per week. It applied regardless of how much you earned above the threshold — a sole trader earning £15,000 and one earning £80,000 both paid the same flat weekly rate.
Class 2 served two purposes: it counted toward qualifying years for the State Pension (and for certain contributory benefits like new-style ESA), and it was a very small income for HMRC. From the government’s perspective, its administrative overhead was disproportionate to what it raised.
From April 2024, compulsory Class 2 NIC was abolished for sole traders with profits at or above the small profits threshold. The abolition was intended to simplify the system and reduce costs for self-employed people. The benefit entitlement that Class 2 built — most importantly, qualifying years for the State Pension was restructured to accrue through Class 4 NIC instead.
What Replaced It — the 2024/25 and 2026/27 Position?
The Current Structure
From April 2024 onwards:
- Compulsory Class 2 NIC: abolished for profits at or above the small profits threshold
- Class 4 NIC: continues, with revised rates. Now builds State Pension entitlement
- Voluntary Class 2 NIC: available for those below the small profits threshold who want to protect benefit entitlement
The result: most side hustlers with profits above the small profits threshold (£6,845 for 2026/27) pay only Class 4 NIC. They no longer pay a separate Class 2 flat charge.
What This Means in Practice?
A sole trader earning £8,000 profit in 2026/27 previously paid Class 2 NIC (£3.45 × 52 = £179.40/year) plus Class 4 NIC on profit above £12,570 (in this case: none, since £8,000 < £12,570). Now they pay zero NIC. Their Class 4 threshold (£12,570) has not changed, but the flat Class 2 charge is gone.
A sole trader earning £20,000 profit previously paid Class 2 NIC plus Class 4 on profit between £12,570 and £20,000. Now they pay Class 4 only (6% × £7,430 = £445.80/year). The saving compared to pre-2024 is the £179.40 flat Class 2 charge.
Class 4 NIC in Full: Rates, Thresholds, Calculation
Class 4 Rates for 2026/27
- 0%: profits up to £12,570 (lower profits limit)
- 6%: profits between £12,570 and £50,270
- 2%: profits above £50,270
Class 4 Thresholds
The lower profits limit (£12,570) matches the personal allowance. This is not a coincidence, the government aligned the two to ensure you do not pay National Insurance on income that is not taxed.
The upper profits limit (£50,270) matches the higher-rate income tax threshold. Above this, the Class 4 rate drops from 6% to 2%.
How Class 4 is Calculated?
Class 4 NIC is calculated as part of your Self Assessment return. You do not need to calculate it yourself — the return does it automatically when you enter your profit figure.
The calculation is:
(Profit between £12,570 and £50,270) × 6% = Class 4 NIC on this band
(Profit above £50,270) × 2% = Class 4 NIC on this band
Total Class 4 NIC = both amounts added together
When Class 4 NIC First Applies to You?
Class 4 NIC only applies once your self-employed profit exceeds £12,570 in the tax year. For most side hustlers — particularly those starting out or running a hustle alongside employment — self-employed profit rarely reaches this threshold.
However, for employed side hustlers, there is an important interaction: your salary already takes you above the lower profits limit. The NIC calculation treats your employment income and self-employment profits together when determining which rate band applies to the self-employed profits.
Voluntary Class 2 Contributions — Who Should Consider Them?
Even though compulsory Class 2 NIC is abolished for most, voluntary Class 2 contributions remain available for those with profits below the small profits threshold.
Voluntary Class 2 Rate for 2026/27: £3.45 Per Week
Who is Below the Small Profits Threshold?
If your self-employed profit is between £0 and £6,844 in 2026/27, you are below the small profits threshold.
This applies to:
- Side hustlers in early stages whose profits are very low
- Those with significant allowable expenses who reduce net profit below the threshold
- People doing occasional one-off self-employed work
What Voluntary Class 2 Buys You?
Each year in which you make Class 2 NIC contributions (compulsory or voluntary) counts as a qualifying year for: the State Pension (you need 35 qualifying years for the full new State Pension); new-style Employment and Support Allowance (requires 2 qualifying years in the last 3 tax years); Bereavement Support Payment; and Maternity Allowance.
The Financial Case
The full new State Pension in 2026/27 is £12,547.60 per year. Each qualifying year you add increases your eventual pension by approximately £358 per year (£12,547.60 ÷ 35). One year of voluntary Class 2 NIC at £3.45/week costs £179.40.
The additional pension value from that qualifying year, received over 20 years of retirement, is approximately £7,160. The return on £179.40 is substantial — particularly for younger side hustlers with gaps in their NI record.
Who Should Pay Voluntary Class 2?
Anyone with profits below the small profits threshold who has fewer than 35 qualifying years and is building toward full State Pension entitlement. To check your qualifying years and National Insurance record: gov.uk/check-national-insurance-record.
How to pay: Through your Self Assessment return. When completing the return, you have the option to pay voluntary Class 2 NICs. Tick the relevant box and include the payment with your January settlement.
NIC For Side Hustlers With a Paye Job
This is where the interaction becomes important and is frequently misunderstood.
If Your Salary Already Exceeds the Lower Profits Limit?
Your salary is handled through PAYE. Your employer deducts employee NIC at 8% on earnings between £12,570 and £50,270, and at 2% above £50,270.
When you also have self-employed income, your Class 4 NIC is calculated on your self-employed profits. But the Class 4 thresholds (£12,570 lower limit, £50,270 upper limit) apply to self-employed profits in isolation — not to the combined total of salary and profits.
The Practical Effect: Class 4 From the First Pound of Profit
Because your salary has already taken you above £12,570, every pound of self-employed profit is subject to Class 4 NIC at 6% from the first pound — there is no Class 4-free band to use. The lower profits limit has effectively been used by your employment income.
Example: Salary of £30,000. Self-employed profit of £3,500.
The employee NIC on the salary is handled by your employer. For self-employed profits, because your salary is above £12,570, the Class 4 lower limit is already exceeded. Class 4 NIC on the £3,500 = £3,500 × 6% = £210.
The Upper Limit Interaction
If your salary plus self-employed profit exceeds £50,270, a portion of your self-employed profit may attract only 2% Class 4 rather than 6%. This is handled through your Self Assessment return automatically.
Overpayment Refunds
If you pay NIC through both PAYE and Self Assessment and the combined total exceeds the annual maximum, HMRC will refund the overpayment. This is handled through your Self Assessment return.
NIC and State Pension Qualifying Years
The abolition of compulsory Class 2 NIC raised questions about how self-employed people build State Pension qualifying years. The government addressed this in the 2024 reform.
Under the New System (From 2024/25)
Sole traders with profits at or above the lower profits limit (£12,570 for 2026/27) receive a qualifying year automatically — without needing to pay any Class 4 NIC specifically for this purpose. The qualifying year is granted as long as you file a return showing profits at or above the threshold.
Sole traders with profits between £6,845 and £12,569 also receive a qualifying year automatically — a qualifying year “credit” — even though no NIC is paid on these profits.
Sole traders with profits below £6,845 do not automatically receive a qualifying year. This is where voluntary Class 2 contributions matter.
Checking Your Record
To see your current State Pension forecast and qualifying years, visit gov.uk/check-state-pension. This shows how many qualifying years you have, how many you need, and what your forecast pension will be at State Pension age. Check how your total profit triggers the NIC calculation.
Frequently Asked Questions
Did Class 2 abolition mean I no longer contribute to the State Pension from my side hustle?
No. The 2024 reform preserved State Pension entitlement through Class 4 and through qualifying year credits. Most sole traders with profits above the lower profits threshold (£12,570) automatically receive a qualifying year. Those below the small profits threshold can pay voluntary Class 2 to get one.
I registered as self-employed before April 2024. Do I still pay Class 2?
No. Compulsory Class 2 NIC was abolished from 6 April 2024 for all self-employed people with profits at or above the small profits threshold, regardless of when they registered. If you paid Class 2 in 2023/24, you paid the last year of compulsory contributions.
My side hustle profit is £9,000. Do I pay any NIC?
No Class 4 NIC, because £9,000 is below the £12,570 lower profits limit. You automatically receive a qualifying year for State Pension purposes because your profit is above the £6,845 small profits threshold. No voluntary Class 2 is required unless you want to make additional contributions.
Can I check what NIC class applies to me without using an accountant?
Yes. HMRC’s Self Assessment return calculates Class 4 NIC automatically when you enter your profit figure. For checking State Pension qualifying years and whether voluntary Class 2 makes sense, use the gov.uk personal tax account at gov.uk/personal-tax-account.
What to Read Next?
For how NIC fits into your overall side hustle tax picture, see our complete UK side hustle tax guide.
For the registration process that triggers your NIC obligations, see our guide on how to register for self-employment and NICs.
Verified against HMRC guidance as of 13 June 2026.
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