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A few thoughts on National Insurance

Self employed NI

The chances are that if you try stopping 100 people in the street and ask what they know about National Insurance contributions (NI) most of them will politely invite you to go away. Many of the rest might tell you it pays for the NHS. And they’d be wrong; or mostly wrong.

Only about 20% of the NI we all pay goes towards the NHS. The bulk of it is used to pay for the state pension – and in fact if you don’t pay any NI you won’t qualify to get the pension. And that’s why employees under 16, or over the state pension age don’t pay NI. Coincidentally only about 20% of the cost of the NHS is paid for by NI contributions. The rest comes from general taxation – income tax, VAT, alcohol and tobacco duties, bingo tax etc. – and of course hospital car park charges.

We all have a National Insurance number that is used to keep track of how much NI we have paid each year. NI numbers are all in the form AB123456C. The final letter is either A, B, C or D and it’s a check character that doesn’t mean anything special. The two letters at the beginning are roughly an indication of your date of birth. Most people under about 41 have an NI number that begins with a ‘J’, the next oldest have NI numbers starting with ‘N’, while my NI number starts with a ‘Y’. If you are not a UK citizen your NI number will begin with an ‘S’. The numbers (the 123456 bit) are issued in order and don’t mean anything special, although one oddity is that the last two digits (the 56 bit) are used by the JobCentre to determine your sign on day if you are unemployed: 00-19 Monday, 20-39 Tuesday etc.

If you’ve ever been employed you will probably remember the NI deductions on your payslip, which are called ‘Class 1 Primary’ contributions. Other people pay different classes of NI: employers pay ‘Class 1 Secondary NI’, the self-employed pay ‘Class 2’ and ‘Class 4’ contributions, and anyone who hasn’t paid enough NI to get the full state pension can make up the difference by paying ‘Class 3 Voluntary’ NI.

This web site is aimed at self-employed sex-workers, and particularly independent escorts, so how much NI do you pay?

Class 2 NI, which is still lovingly known as the weekly stamp despite not having been a stamp since about 1975, is paid by all self-employed at the rate of £2.75 per week. When you register with HMRC you can choose to pay either monthly by direct debit or they will send you a bill every 3 months. Those over state retirement age or under 16 don’t have to pay. Neither does anyone whose earnings, after taking off expenses, come to less than £5,885 per year – but in that case you need to apply for an exception certificate.

The self-employed also pay Class 4 NI. This is calculated annually along with your income tax and it’s based on your profits, that is your income after taking off your allowable expenses. You pay nothing on the first £7,956 and then 9% on the next £33,909. If you earn more than that you will pay 2% on the excess.

So if your income is £60,000 and you have £15,000 of allowable expenses (travel, advertising, apartment rent, mobile phone ….) giving you a profit of £45,000, your NI bill will look like this:

  • 7,956 at 0%
  • 33,909 at 9% = 3,051.81
  • 3,135 at 2% = 62.70
  • Total class 4 NI = £3,114.51

This will be paid with your income tax through the self-assessment system. So it makes sense to save up for it!

NB The rates have been the same for the last 4 years but the thresholds (£7,956 and £33,909) have gradually increased over the years.


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